Dr Bryce Wilkinson: Bureaucracy is strangling NZ’s potential for growth

Prime Minister Christopher Luxon says he wants a bureaucracy that says “yes.” He is right to want that of course, but a lot of current rules would need to change.

Under current rules, far too much is too hard. Try expanding a port or hosting a concert at Eden Park. Or try importing building materials or opening a supermarket.

New Zealand’s regulatory culture of “no” has become so pervasive that even the simplest reforms now spark fierce resistance. Consider the government’s recent proposal to let visitors work remotely while holidaying here.

This is hardly revolutionary policy. Many countries actively court these “digital nomads.” Yet the public reaction was telling.

“They will take our housing,” warned one online commenter. “Make them bring their own tents,” suggested another. Several demanded mandatory health insurance. One feared an invasion of “influencers trying to get free stuff.”

Opposition Leader Chris Hipkins joined the chorus, arguing we should focus on keeping people here rather than welcoming new arrivals. As if that were the alternative.

This reflexive negativity illustrates a deeper problem. New Zealand’s economy is being strangled by excessive caution and regulatory overkill.

There is a galling irony here. New Zealand pioneered bold economic reforms in the 1980s. Today we debate whether tourists can check work emails from cafés.

Some numbers are telling. Property developers now spend $1.29 billion annually navigating consent processes. For small projects, paperwork can account for 16 percent of total costs.

The Port of Tauranga’s expansion would boost exports for forestry, kiwifruit and dairy. Yet bureaucratic delays have stalled the project for years. Eden Park operates under council-imposed event caps while New Zealanders fly to Australia for concerts in packed stadiums.

Even our tax system seems designed to say “no.” When businesses invest in new machinery to boost productivity, New Zealand’s depreciation provisions are among the most restrictive in the OECD.

The problem extends beyond infrastructure and investment. Our supermarket sector exemplifies how regulation affects market structure. Planning rules and zoning restrictions have historically made it difficult for competitors to establish themselves. The Overseas Investment Act created additional hurdles for potential foreign entrants. While various factors have influenced competition in the grocery sector, government policies have contributed to an environment that favours established players.

Similar patterns emerge in construction. A few firms dominate the supply of critical building materials, contributing to high building costs. This is not merely about scale in a small market. The building code and certification process favour established products and make it slow and expensive for new or imported products to gain approval. Even common materials used safely for years in Australia or Europe face lengthy and costly verification processes here. The result is higher costs for builders and homeowners alike.

Meanwhile, the banking sector faces its own regulatory headwinds. Recent capital requirements, while well-intentioned, may have unintentionally insulated the incumbents. Higher capital ratios may marginally improve safety but create a higher cost base that likely gets passed to borrowers via wider interest spreads.

Reform need not be complex. Sometimes it simply means removing bureaucratic obstacles. Trust regulators in other developed countries rather than retesting everything here. The coalition agreement’s proposal to automatically authorise medicines approved by other trusted countries shows the way.

Other countries show what is possible. Several nations have successfully tackled regulatory burdens through systematic reform programs. Australia’s approach to recognising international product standards has helped reduce building material costs. Similarly, countries like Singapore have streamlined their foreign investment processes while maintaining appropriate safeguards.

Some promising changes are emerging. The government’s plan to strengthen landowners’ property rights when replacing the Resource Management Act should speed up land use decisions. The proposed fast-track consenting process, if properly implemented, could cut years off approval times for major projects. Immigration settings have begun to ease.

But these reforms face the same headwinds as the digital nomad proposal. Every change, no matter how sensible, must overcome a chorus of imagined risks and hypothetical problems. There has been no visible progress in authorising overseas-approved medicines, despite the proposal featuring in both coalition agreements.

Those objecting to developments need to be confronted with the lost value to the community of getting their way.

The Prime Minister is right about the problem of our negative and utterly risk-averse culture. But changing our bureaucratic culture requires more than speeches. It demands sustained effort to identify and eliminate unnecessary rules, requirements and restrictions.

This is not about reckless deregulation. Rather, it means building systems that enable rather than obstruct. That manage real risks rather than imagined ones. That trust people and businesses to make sensible decisions within clear frameworks.

The alternative is continued decline. A country where good ideas die in committee rooms. Where expansion plans gather dust in filing cabinets. Where entrepreneurial energy dissipates in endless consultation processes.

Until then, New Zealand’s “culture of no” will keep saying “yes” only to stagnation.

Dr Bryce Wilkinson is a Senior Fellow at The New Zealand Initiative, Director of Capital Economics, and former Director of the New Zealand Treasury. His articles can be seen HERE. - where this article was sourced.