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OPINION: New Zealand’s new regulators: hurry up…..and wait?

April 03, 2019

Contacts

Partners Sally McKechnie

Government reform and public policy Public law

As is abundantly clear in recent media reporting, the Labour/NZ First Government is lining up multiple sectors for regulation changes. And with a number of inquiries and reviews currently underway or soon to wrap-up, there may be more yet to come.

But how is the government actually tracking in terms of introducing new regulatory regimes?

Telecommunications Regulation

The first change out of the blocks for the new government was the Telecommunications (New Regulatory Framework) Amendment Act, passed in November 2018.

This is a significant change which will bed in over 2019. The Act establishes a regulatory framework for fibre fixed line access services, and deregulates unnecessary copper fixed line access services. It also provides for more regulatory oversight of retail service quality, requiring the Commerce Commission to make available reports and information on retail service quality in a way that informs consumer choice (s9A(1)(f)). Many of these changes draw heavily on the regulatory experiences in the electricity sector.

However, the process was well in hand prior to the change of government. Accordingly, it does not tell us much about this government’s ability to deliver new regulatory frameworks.

Therapeutic Products Regulation

In the therapeutic products arena, a new regulatory regime is also in the works. This had had an even longer genesis than telecommunications regulation, having been on the cards for most of this century.

A draft Therapeutic Products Bill and consultation document are finally out. The Ministry of Health is seeking feedback on the draft. The current plan is to repeal and replace the Medicines Act 1981, generally agreed to be an outdated piece of legislation, and to establish a new regulatory scheme for therapeutic products.

Therapeutic products under the new Bill includes medicines and medical devices, but excludes natural heath products as far as possible, including rongoā Māori (traditional Māori healing) and dietary supplements. Government is considering options for how these can be separately regulated (p5 [19] consultation doc).

The Medicines Act 1981 vests regulatory and administrative powers in the Minister of Health and the Director-General of Health.

The new Bill proposes a scheme under which a regulator would hold these powers independently of the Minister of Health. The Ministry of Health consultation document notes that this will better reflect the realities of current practice, as most regulatory powers have been delegated to Ministry of Health staff (p7).

This would clearly be a significant reform. However, a decision on the form of the regulator is yet to be made. It may be a Crown entity, departmental agency or part of the Ministry of Health - the draft Bill provides for the Director-General of Health to administer the scheme as a placeholder for the time being.

Banking and Insurance Regulation

The most recently announced and possible most-closely watched changes will be the new banking and insurance regulations. Cabinet agreed recently to fast-track the introduction of this regime, following the recent release of the FMA and RBNZ’s report on the insurance sector in January.

The response to the FMA and RBNZ was swift. Finance Minister Grant Robertson wants to see clearer duties on banks and insurers to consider a customer’s interest and outcomes, an appropriately resourced regulator, strong penalties for breaches of duties, and change to internal sales incentives and soft commissions.

This kind of prompt government reaction to a critical report could be a sign of what is to come. However, the proof will be in the detail - as recent experience is showing, significant regulatory reform and the creation of new regulators is difficult, and time consuming.

It will also be revealing how long the detail takes to arrive. The government had planned to release a consultation paper on banking and insurance in May and introduce new legislation later in 2019. This indication was given before the tragic events in Christchurch. There may now be a very understandable change in Cabinet’s short term focus.

Other regulatory changes?

Things are also going slowly in other areas.

In July last year Simpson Grierson released an FYI about upcoming developments in three waters regulation. We are still waiting for those. Detailed policy proposals are expected to be put to Cabinet in June with announcements in late 2019.

In one of our more highly regulated areas, the Electricity Price Review Panel’s Options Paper contains several options for reforming regulation of the electricity sector. Perhaps the most significant option put forward, is to create a new, combined gas and electricity regulator replacing the Gas Industry Company and Electricity Authority. The Panel was undecided on that option, and it has received a frosty reception from some quarters. The Panel will give its final paper and recommendations to the Minister in mid-2019.

Conclusion

So on balance, regulatory reform and change is proving to be slower than many - including the politicians no doubt - would like. In this “year of delivery” and competing priorities, it will be interesting see which of these reforms gets through the gate.

Contributors fiona.thorp@simpsongrierson.com