Thirty million dollars over four years, when the government plans on core government expenditure of over one hundred and fifty billion dollars in the 2026/2027 fiscal year, isn’t a huge sum.
But I still wonder just how they’re going to manage to spend that much on policy and regulatory work in an area where Parliament has not yet even passed enabling legislation.
Page 37 of Budget 2026’s Summary of Initiatives describes a proposal for reducing the risk of online harm to children.
The description reads, “This initiative provides funding to develop policy and possible regulatory options to improve children’s online safety, subject to future policy and funding decisions.”
The Department of Internal Affairs will get six million dollars for the 2026/27 fiscal year, followed by $7.75 million the next year, and $8.5 million for each of the subsequent two years – for $30.75 million all-up.
If we take the description literally, it is at least six million dollars per year for four years just for work on policy and developing regulations.
I can understand how a government could spend very large amounts of money to do the policy, regulatory, and legislative work to build a new resource management system.
It is harder, at least for me, to understand how a government could spend over six million dollars per year just for the policy and regulatory development work on this one.
Last year, the Prime Minister promised to follow Australia’s lead in banning those under the age of 16 from holding accounts on social media platforms. National MP Catherine Wedd had proposed a member’s bill that would broadly follow Australia’s approach. Prime Minister Luxon pledged his support for the bill.
Banning youths from having accounts with social media platforms means requiring adults to prove that they are not youths. That is harder than it sounds, if you want a system that is not too cumbersome for adults, that respects privacy, and that isn’t easily worked-around by youths.
Nobody has yet come up with a good way of doing it, including Australia.
Australia’s youth social media ban is not going well. Australian youths find it easy to circumvent Australia’s ban. And youths who comply with the ban are seen as less popular than their classmates who find ways of staying online.
Let’s leave that aside for the moment. If the government wanted to follow Australia’s approach, the policy and regulatory work to develop that option would not be that expensive. A member’s bill has already been drafted.
And Australia designed its regime to offload regulatory design costs onto the regulated social media platforms. Rather than provide detailed descriptions of how platforms should keep kids out, it threatened platforms with large fines if they didn’t take “reasonable steps” to keep kids out.
Running the regime would take staff. Someone would have to handle correspondence. Compliance would need to be monitored. And, ideally, there’d be funding for evaluation work to check that the system did what it said on the tin and didn’t impose unreasonable burdens on adults or substantially harm online privacy.
But developing the policy and possible regulatory options would not take over six million dollars per year for four years.
The government has been considering other options.
A Select Committee inquiry last year canvassed the issue and suggested a broader approach. In addition to setting age restrictions for social media platforms, the Committee suggested public online safety campaigns, restrictions on online advertising, liability frameworks for harm, and an independent national regulatory agency for online safety. The Green Party and the ACT Party provided dissenting reports highlighting risks to online privacy and freedom of speech; I share their concerns, but let’s again leave those to one side.
Those options could prove far more expensive. But it would be difficult to spend an average of over $7.5 million per year just developing policy and regulation in this single policy area.
A principal policy advisor earns about $150,000 per year. Triple that figure to account for overheads and support. A six-million-dollar first-year budget would support over a dozen full-time analysts developing policy and regulatory options. The final two years’ budgets would cover around nineteen principal-advisor-equivalent analysts plus support. For a single policy area.
For a private-sector comparator, the Initiative has about a half-dozen full-time analysts, including me. On an annual budget of around three million, we think about policy and possible regulatory options across a wide range of policy areas – and occasionally write columns.
The time pattern of the appropriation also makes no sense if it is aimed at policy and regulatory development. Remember that the appropriation starts at six million and increases from there. But policy and regulatory development costs should be front-loaded. Once the policy is largely developed, the cost should decrease. Spending overall could increase if a new regulator has been established and has to operate. But spending on policy development should decline.
The simplest explanation is that the funding is not just for policy development, regardless of the text in the Budget.
A careful look at Vote Internal Affairs, the budget for the Department of Internal Affairs, provides a hint.
Appropriations within the Vote are categorized. The Policy and Related Services categorisation is for appropriations aimed at providing policy advice and services to Ministers. And there is a Regulatory Services categorisation for appropriations whose purpose is “to carry out the effective delivery of regulatory functions and services”.
In 2025/26, DIA had a $1.2 million Budget item for “Reducing the Risk of Online Harm to Children: Policy Direction and Home Agency”. That item was categorised as Policy and Related Services. The new funding, despite being described as funding policy and regulatory options development, is booked under Regulatory Services, not Policy and Related Services. Within DIA’s Regulatory Services category, Digital Safety rises from an estimated actual $8.6 million in 2025/26 to $16.9 million budgeted in 2026/27.
It would be hard to spend over $30 million just on policy development work aimed at reducing online harm to children. It would be easy to spend that much on running a substantial new regulatory apparatus within DIA, but no Government legislation establishing such a regime has yet been introduced, let alone passed.
While it is a very good idea to think hard about how much it would cost to run a new regulatory regime before proposing it, budgeting for it before it has been proposed is a bit presumptuous. Parliament could yet choose differently and would have good reason to do so.
Retired Justice David Harvey, arguably the country’s most tech-savvy justice whether sitting or retired, has raised substantial concerns about placing this regulatory initiative within DIA. He warns that European approaches to the problem separate functions that here would be concentrated within DIA.
When I first read this budget line at budget lockup, I was worried that the government intended to spend more than double my shop’s budget on policy and regulatory development work within a single area. The figure seemed impossibly padded.
On looking more closely, it’s more worrying. The allocation more plausibly funds a substantial new regulatory apparatus, and none of us can have the faintest clue what it might look like because it has not yet even been proposed.
We only know that it will cost $8.5 million per year from 2028/29 onward, assuming that funding continues after the end of the budget forecast period.
Allocation first, policy afterwards?
Dr Eric Crampton is Chief Economist at the New Zealand Initiative. This article was first published HERE
The description reads, “This initiative provides funding to develop policy and possible regulatory options to improve children’s online safety, subject to future policy and funding decisions.”
The Department of Internal Affairs will get six million dollars for the 2026/27 fiscal year, followed by $7.75 million the next year, and $8.5 million for each of the subsequent two years – for $30.75 million all-up.
If we take the description literally, it is at least six million dollars per year for four years just for work on policy and developing regulations.
I can understand how a government could spend very large amounts of money to do the policy, regulatory, and legislative work to build a new resource management system.
It is harder, at least for me, to understand how a government could spend over six million dollars per year just for the policy and regulatory development work on this one.
Last year, the Prime Minister promised to follow Australia’s lead in banning those under the age of 16 from holding accounts on social media platforms. National MP Catherine Wedd had proposed a member’s bill that would broadly follow Australia’s approach. Prime Minister Luxon pledged his support for the bill.
Banning youths from having accounts with social media platforms means requiring adults to prove that they are not youths. That is harder than it sounds, if you want a system that is not too cumbersome for adults, that respects privacy, and that isn’t easily worked-around by youths.
Nobody has yet come up with a good way of doing it, including Australia.
Australia’s youth social media ban is not going well. Australian youths find it easy to circumvent Australia’s ban. And youths who comply with the ban are seen as less popular than their classmates who find ways of staying online.
Let’s leave that aside for the moment. If the government wanted to follow Australia’s approach, the policy and regulatory work to develop that option would not be that expensive. A member’s bill has already been drafted.
And Australia designed its regime to offload regulatory design costs onto the regulated social media platforms. Rather than provide detailed descriptions of how platforms should keep kids out, it threatened platforms with large fines if they didn’t take “reasonable steps” to keep kids out.
Running the regime would take staff. Someone would have to handle correspondence. Compliance would need to be monitored. And, ideally, there’d be funding for evaluation work to check that the system did what it said on the tin and didn’t impose unreasonable burdens on adults or substantially harm online privacy.
But developing the policy and possible regulatory options would not take over six million dollars per year for four years.
The government has been considering other options.
A Select Committee inquiry last year canvassed the issue and suggested a broader approach. In addition to setting age restrictions for social media platforms, the Committee suggested public online safety campaigns, restrictions on online advertising, liability frameworks for harm, and an independent national regulatory agency for online safety. The Green Party and the ACT Party provided dissenting reports highlighting risks to online privacy and freedom of speech; I share their concerns, but let’s again leave those to one side.
Those options could prove far more expensive. But it would be difficult to spend an average of over $7.5 million per year just developing policy and regulation in this single policy area.
A principal policy advisor earns about $150,000 per year. Triple that figure to account for overheads and support. A six-million-dollar first-year budget would support over a dozen full-time analysts developing policy and regulatory options. The final two years’ budgets would cover around nineteen principal-advisor-equivalent analysts plus support. For a single policy area.
For a private-sector comparator, the Initiative has about a half-dozen full-time analysts, including me. On an annual budget of around three million, we think about policy and possible regulatory options across a wide range of policy areas – and occasionally write columns.
The time pattern of the appropriation also makes no sense if it is aimed at policy and regulatory development. Remember that the appropriation starts at six million and increases from there. But policy and regulatory development costs should be front-loaded. Once the policy is largely developed, the cost should decrease. Spending overall could increase if a new regulator has been established and has to operate. But spending on policy development should decline.
The simplest explanation is that the funding is not just for policy development, regardless of the text in the Budget.
A careful look at Vote Internal Affairs, the budget for the Department of Internal Affairs, provides a hint.
Appropriations within the Vote are categorized. The Policy and Related Services categorisation is for appropriations aimed at providing policy advice and services to Ministers. And there is a Regulatory Services categorisation for appropriations whose purpose is “to carry out the effective delivery of regulatory functions and services”.
In 2025/26, DIA had a $1.2 million Budget item for “Reducing the Risk of Online Harm to Children: Policy Direction and Home Agency”. That item was categorised as Policy and Related Services. The new funding, despite being described as funding policy and regulatory options development, is booked under Regulatory Services, not Policy and Related Services. Within DIA’s Regulatory Services category, Digital Safety rises from an estimated actual $8.6 million in 2025/26 to $16.9 million budgeted in 2026/27.
It would be hard to spend over $30 million just on policy development work aimed at reducing online harm to children. It would be easy to spend that much on running a substantial new regulatory apparatus within DIA, but no Government legislation establishing such a regime has yet been introduced, let alone passed.
While it is a very good idea to think hard about how much it would cost to run a new regulatory regime before proposing it, budgeting for it before it has been proposed is a bit presumptuous. Parliament could yet choose differently and would have good reason to do so.
Retired Justice David Harvey, arguably the country’s most tech-savvy justice whether sitting or retired, has raised substantial concerns about placing this regulatory initiative within DIA. He warns that European approaches to the problem separate functions that here would be concentrated within DIA.
When I first read this budget line at budget lockup, I was worried that the government intended to spend more than double my shop’s budget on policy and regulatory development work within a single area. The figure seemed impossibly padded.
On looking more closely, it’s more worrying. The allocation more plausibly funds a substantial new regulatory apparatus, and none of us can have the faintest clue what it might look like because it has not yet even been proposed.
We only know that it will cost $8.5 million per year from 2028/29 onward, assuming that funding continues after the end of the budget forecast period.
Allocation first, policy afterwards?
Dr Eric Crampton is Chief Economist at the New Zealand Initiative. This article was first published HERE
No comments:
Post a Comment
Thank you for joining the discussion. Breaking Views welcomes respectful contributions that enrich the debate. Please ensure your comments are not defamatory, derogatory or disruptive. We appreciate your cooperation.