English puts regulations on watch

HAMISH RUTHERFORD
Last updated 10:56 09/12/2013

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Finance Minister Bill English says New Zealand's regulatory regime will be placed under internal scrutiny following a period where some investors voiced concerns about the investment environment.

Admitting that a series of "disconnected" events risked creating a perception that New Zealand was an unsafe place to invest, he said there would be a "check" of whether regulatory settings were up to standard.

"We've got to manage our way through a period where some investors think anything could happen," English said.

Shares in Chorus, which owns the copper-based telecommunications network, have lost more than half of their value since the Commerce Commission issued a preliminary decision on what it can charge for wholesale broadband connections.

Shares in Mighty River Power and Meridian Energy, both partially sold by the Government this year, have also dropped on concerns about the impact of a Labour-Greens plan to overhaul the wholesale electricity market.

English said the Government could do little about Opposition policy beyond winning the election, but would perform a health check of the regulatory framework to ensure that whatever policy was adopted, the outcomes were predictable.

"We need to scrutinise our regulatory regimes, make sure they are recognisably world standard, and then communicate that to investors as much as we can," English said.

He said the decisions about copper broadband had "raised questions" about predictability.

"I don't think we need to do anything too sweeping," the finance minister said.

"Most assessments of our regulatory regime put it pretty high up among developed countries."

In recent weeks there have been comments from offshore investors about New Zealand's political risk.

On Friday London-based fund manager Jason Pidcock, who manages a fund worth more than $8.5 billion, claimed investing in New Zealand was as risky as investing in Pakistan. His fund owns shares in Chorus, Meridian and Mighty River.

English dismissed the claims, but admitted New Zealand might have taken its reputation for granted and had to "relentlessly" communicate with the world to prevent the complaints from becoming the prevailing view.

"We're getting a few knee-jerk responses, but it's a bit like food safety. You're better to be ahead of it, rather than let the perception build up," he said.

"We value predictability and certainty about the way our market works and the way the Government works.

"When people say it's starting to look unpredictable we need to do a check because we know from the rest of the business scene that predictable policy works - it does help give people confidence to get them investing."

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The check would not be conducted while the Government was working through issues relating to broadband pricing.

"When the path there is clearer we can take a wider view," English said.

The issues thrown up by the Commerce Commission decision were more unsettling than those created by the Waitangi Tribunal over asset sales, he said,

The Supreme Court had accepted that the Government could pursue its asset sales programme because its wider Treaty negotiations showed the sales would not prejudice its ability to settle claims.

Investors did not have a problem "wrestling with unique issues, as long as there's a reasonable amount of certainty about how they're dealt with" English said.

The same usually applied to Government policy, so long as the rules were clear.

"Investors don't so much argue with your policy, so much as they want certainty that it's going to be somewhat rational, and that the impact of it can be predicted."

- Fairfax Media

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