Coronavirus decision-making needs new Act of Parliament

Roger Partridge
Insights Newsletter
27 March, 2020

The coronavirus lockdown is a challenge for every one of us. Every worker, family, charity, public institution and firm. Workers are even questioning whether their jobs will exist when they emerge from enforced hibernation. Unfortunately, far too many may not.

The lockdown has set off a regulatory chain reaction that threatens to blow up the business world - and the jobs it creates.

Only rapid-fire decision-making can avoid a widespread business-sector meltdown.

Two examples illustrate the difficulties businesses face:

  • With incomes decimated, firms are desperate for credit. Yet the Responsible Lending Code requires lenders to be satisfied a borrower can pay back the loan without suffering undue hardship. In the midst of the crisis, how can financiers possibly do this?
  • Before taking on a new loan, directors must be satisfied their company will be able to repay its debts as they fall due. Yet without a crystal ball, they have no way of making this assessment.

Those are just examples of laws that are now obstacles to businesses trying to stay alive during the crisis. Over the last week, The New Zealand Initiative has collated a small library of similar concerns and relayed them to Finance Minister Grant Robertson at his invitation.

If the Government wants business to survive, it needs a decision-making mechanism to unblock this myriad of regulatory obstacles.

Unfortunately, the Epidemic Preparedness Act 2006 is not that tool. While the Act contains many special powers, its requirement that a regulation or restriction is “impossible or impractical to comply with” is ill-suited to resolving regulatory obstacles facing business. Neither of the examples above would trigger the “impossible or impractical” test. The problem is not that firms cannot comply with the rules. The rules are simply unsuitable for the circumstances.

Some regulatory problems can be mitigated by enforcement agencies. The Commerce Commission set a good example this week stating it will not enforce coronavirus related breaches of the Commerce Act. But this approach still leaves firms exposed to lawsuits from third parties.

The Government needs a new, targeted, flexible decision-making process to suspend or modify obstructive regulations, including those enshrined in statutes. The power should be limited to issues arising from the coronavirus crisis. It should also be subject to scrutiny – and possible veto – by the new Special Committee of Parliament. And it should have a sunset clause.

To avoid economic rigor mortis, Parliament must be recalled urgently to pass the necessary enabling legislation.

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