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Brief Counsel

Lifting service sector productivity - which levers to pull?

31 July 2013

​Where do you think the greatest potential to lift service industry productivity lies – in a more open occupational licensing regime, through more customer-driven competition, or through greater technological innovation and uptake?

The Productivity Commission plans to explore two of these three areas in detail and is asking in an interim report released last week for guidance on which two.

Submissions close on 23 August 2013.

Focus of inquiry – what’s in

The industries which the Productivity Commission has identified for examination are:
  • wholesale trade 
  • retail trade
  • transport, postal and warehousing
  • information media and telecommunications
  • finance and insurance
  • professional, scientific and technical
  • accommodation and food
  • rental, hiring and real estate
  • administrative and support
  • arts and recreation, and
  • other - personal care services, funeral services, professional and labour association and other interested group services.

What’s out?

Education, health and social assistance services have been excluded because of the high levels of public provision and the difficulties of isolating the productivity statistics for the market-provided segment from the sector as a whole.  The Government has confined the inquiry to “market-provided services” on the basis that it already has a programme underway to lift public sector productivity.
The Commission is including those State-Owned Enterprises which sell their output at “economically significant prices” to generate a profit.  A price is “economically significant” if it is an important driver of how much producers are willing to sell and how much consumers are willing to buy. 
However, the electricity, gas, water and waste sectors are out (despite a bid by Federated Farmers to have them included) because the Commission does not deem them to be true service industries. 

Structure of the inquiry

The Commission has been asked to provide an overview of the service sector and to develop recommendations to lift the sector’s productivity performance.  These must focus on impediments which can be overcome through government activity or through changes to government policy.
It has nominated three topics for in-depth study and plans to explore two of the three.
  • Is there an appropriate balance between the costs and benefits that stem from the occupational licensing regime in the services sector?
  • How can consumers be stimulated to drive greater competition in New Zealand services markets and is there a role for the government?  Is there scope, say, to use the information required by the new KiwiSaver periodic disclosure rules to develop a variant of the ‘What’s my number’ campaign for the KiwiSaver market?
  • Are there barriers to the successful application of information and communications technologies (ICT) and how can these be addressed?  For example, are concerns about privacy and security inhibiting the adoption of cloud computing?
The Commission wants feedback on which of these issues it should pursue and on how the topic areas can be further refined and developed.

Defining a service?

A number of definitions are available. 
  • A service is something that can be bought and sold, but not carried. 
  • For Statistics New Zealand, it is “everything produced outside the primary and good-producing sectors”.
  • Or it involves intangible rather than tangible products and/or a rental contract rather than transfer of ownership.  So legal advice is a service because it is intangible and hiring a car is a service because you hire rather than buy the car. 

Timeline

The Commission will announce in late August (after it has received the submissions to this report) which two topics it will pursue further and will develop these in a second interim report to be released in January next year.
It plans to produce its final report to Government by 28 April 2014. 
For further information or assistance in preparing a submission, contact the lawyers featured.

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