Former PM says don't over-regulate

Thursday 17th September 2009

Former Prime Minister Jenny Shipley is warning the government not to over regulate in response to the financial crisis.

She told delegates at the INFINZ Conference in Rotorua yesterday that traditionally regulatory response to issues like the crisis are counter-cyclical and go too far.

Changes made in response to events "often create more difficulty, not improvement" and "perverse outcomes".

Shipley said that the government and officials should look at the existing framework and make sure they are being used fully before making changes.

She specifically mentioned the Reserve Bank and said its framework needs to be fully explored and utilised before changes are made.

Shipley said while she had concerns about over-regulating, there were issues with investor confidence as well.

"To put it bluntly small investors do not trust the financial markets," she said.

Institutions need to build confidence and trust with investors again.

Meanwhile many of the big investors will benefit from the current climate. She described them as vultures sitting on the sideline looking for opportunities.

She said there will be some significant transactions coming up. While she made it clear she wasn't promoting a "an idealogical privatization agenda" there was comment later in the conference about how much of New Zealand's business economy was still in the hands of central and local government.

Rob Cameron, who chairs the Capital Developments Taskforce, said a big issue for the investment markets was that many the big sectors such as energy and agriculture were not well represented on the capital markets. Also the banking sector was all but absent from the market too.

While he too made the point that he was not promoting privatization there are ways government-owned businesses could be structured so that they are exposed to "capital market discipline."

He too questioned the need for re-regulation and said there was research which showed that "good law poorly enforced is worse than no law at all."

Cameron said New Zealand had too many enforcement agencies, yet they didn't have the resources of the investigative powers to be fully effective.

His colleague from investment banking firm Cameron and Partners, Paul Dougherty, said that the enforcement agencies weren't about preventing financial accidents.

"Too often they are not the ambulance at the bottom of the cliff, they are more like the coroner."

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