Welcome again to He Pōneketanga, where I give you an insider/outsider's view of how governments work.

After years in the public service trenches and advising the private and charity sectors in Australia and Aotearoa New Zealand, I've seen how policies play out when they hit the real world.

The mounting cost of regulatory compliance has become the elephant in our boardrooms.

While good regulation keeps our economy healthy, the weight of compliance shouldn't break the backs of businesses trying to stay afloat.

Worthy elements

The Government's new red-tape reset aims to tackle this problem. As someone who's worked both sides of the regulatory fence, I can see what they're trying to achieve. 

But I'm concerned we're about to add another layer of bureaucracy to an already creaking system.

Let's look at what we're dealing with. 

New Zealand Institute of Economic Research (NZIER) research from 2015 showed NZ businesses spend $5.2 billion annually on regulatory compliance – that's $2.8b following regulations and another $2.4b managing tax obligations.

Picture that: 2.5% of our GDP is tied up in paperwork instead of flowing into growth, innovation or jobs.

The new regulatory agency proposes worthy elements: a new oversight framework, regulatory principles and a complaints board.

But adding new regulatory layers without streamlining existing ones is like trying to cure a headache by wearing two hats. In fact, World Bank research suggests this approach often increases the total burden rather than reducing it.

This hits our small and medium enterprises particularly hard. They make up 97% of our business landscape and Organisation for Economic Co-operation and Development (OECD) data tells us they pay up to 30 times more per employee to follow regulations compared to large companies.

The current proposal skirts around this reality – there's no meaningful discussion of proportionate regulation for different-sized businesses.

So what's the path forward?

Fundamental shifts

I would encourage the new regulatory agency to start with two quite fundamental shifts in its thinking.

First, we need to move past the idea that more oversight automatically equals better regulation.

Yes, we need strong regulatory systems, but they can't keep operating as open-ended cost-plus arrangements. Every new compliance requirement needs to prove its worth through practical results, not just theoretical benefits.

Second, we need to recognise regulatory systems for what they really are – massive behaviour change programmes affecting thousands of organisations. Yet remarkably, these systems rarely account for their true impact.

When new regulations land on a business owner's desk, they trigger three waves of change costs:

  • Learning costs (figuring out what's changed);
  • Psychological costs (dealing with uncertainty and stress); and
  • Implementation costs (making the actual changes).

Consider a small business owner facing new regulations.

They're simultaneously playing three roles: a student learning new rules, a psychologist managing staff concerns, and a change manager implementing new systems – all while trying to keep their clients happy about the changes and their business running.

The consultation under way on the proposed Regulatory Standards Bill barely acknowledges this reality.

Estonia's digital transformation stands as a powerful case study in regulatory innovation. Through its unified "e-governance" framework, the nation  has significantly reduced compliance costs while strengthening its regulatory oversight.

Its X-Road platform enables secure data exchange between agencies and businesses, eliminating redundant reporting requirements and streamlining administrative processes. The result is a system where business owners spend dramatically less time on compliance tasks than their European counterparts.

RegTech solutions

We're already seeing successful examples of digital transformation closer to home: eRoad's transport management platform demonstrates how digital solutions can simultaneously improve compliance and business efficiency.

By integrating electronic RUC (Road User Charges) management, fleet-tracking and reporting, eRoad shows how technology can reduce administrative burden while improving regulatory oversight. 

Its success in the transport sector provides a blueprint for the broader adoption of RegTech solutions.

The Service Modernisation Roadmap proposed by the Department of Internal Affairs (DIA) also offers an opportunity to build on these successes. While its focus on unifying digital services is commendable, we should explicitly expand its scope to encompass regulatory technology (RegTech) solutions.

I think the new regulatory agency’s heart is in the right place, but without addressing the cumulative burden of our existing regulatory regimes, the current proposals risk becoming another compliance cost – exactly what they aimed to fix.

We need a system that maintains necessary protections while actively reducing unnecessary burdens. Those burdens must include the real cost of change across our diverse business landscape, from corner dairies to tech start-ups.

Until we make these fundamental changes, these well-intentioned proposals risk adding more string to our regulatory tangle, when what we really need are sharper scissors.

Our businesses deserve better than this and so do our regulators.

What we need isn't another oversight framework – it's a complete rethink of how we approach regulation in Aotearoa NZ.

Let me know when we will be ready to have that conversation.