Annual report FY 2021/22

Ka tangi te titi
Ka tangi te kaka
Ka tangi hoki ahau
Tihei Mauri Ora

Tēnā koe,

I‘m pleased to present the Productivity Commission’s Annual Report for the 2021–22 year, one best described as a year of transition and consolidation.

The foundation for our mahi, to provide research and advice to lift productivity for the wellbeing of all New Zealanders, was set by the Minister of Finance in his Letter of Expectations in May 2021. The Minister requested the Commission extend its engagement programme to include a wider range of people, communities, and organisations. We were tasked to look at the longer-term picture, and cross-cutting policy issues and settings, while maintaining at our core, robust and rigorous analysis with recommendations informed by data and evidence.

We began the year with the hope that COVID-19 disruptions were behind us, and we could plan a return to more face- to-face engagements to assist our inquiry and research work. However, the ongoing impact of the pandemic required the organisation and our staff to innovate and adjust once more. These changes have been positive and become our new normal and have helped the Commission respond to intense staffing challenges in a highly competitive employment climate experienced by many public and private sector agencies this year.

In a challenging, but productive year, the Commission successfully delivered our Immigration inquiry, proposing novel solutions to long-standing issues. One of the key recommendations in our final report was ensuring immigration policy is connected to other government plans and objectives around investments in infrastructure and workforce. Alongside the Infrastructure Commission’s proposal for a population plan, and taking a much longer-term focus, we believe there is significant potential to progress towards our productivity and wellbeing aspirations. 

Our staff ventured into new territory with a new inquiry, A Fair Chance For All: Breaking the cycle of persistent disadvantage. This inquiry required the Commission to engage with agencies, organisations and public prior to having a terms of reference agreed. The benefits from this process were positive, and we will take the learnings from this experience to continue to evolve our processes for future work. Ongoing work in this inquiry has continued at pace, with the Commission working hard to engage with a broader range of communities and to communicate the evidence and findings of our interim report.

The Commission received increased funding, which was used to increase the capacity and capability of our economics and research function. This gave the team a welcome boost, re-energising them to continue the value they provide to our inquiries, together with ongoing research and investigation into the links between productivity and wellbeing, at both the organisation and the sector level.

At a Commission-wide level, a refresh of our strategy builds on the foundation set over the first 10 years of the Commission. Following affirmation of our vision and purpose, we began developing areas of work to support a broader range of engagement in the community and to increase understanding of productivity. This included a stakeholder analysis and engagement plan; workforce retention and professional development programmes; building cultural competency and confidence; and clarifying governance, management and operations functions and responsibilities. This work is ongoing, and we will work on the establishment of success measures for reporting on in the coming year.

I look forward to an exciting year ahead as we work toward welcoming a new Commissioner to the team, establishing a new inquiry, completion of our A Fair Chance For All inquiry, and publication of the latest version of Productivity by the numbers.

It has been a fulfilling year with many highlights. I thank my fellow Commissioners for their assistance and contributions, and my wholesome congratulations to staff for all they have achieved during another challenging year.

Ngā mihi nui,

Dr. Ganesh Nana
Chair
New Zealand Productivity Commission | Te Kōmihana Whai Hua o Aotearoa

February 2023

Our purpose

As embodied in the New Zealand Productivity Commission Act, 2010 the principal purpose of the Commission is to provide advice to the Government on improving productivity in a way that is directed to supporting the overall wellbeing of New Zealanders, having regard to a wide range of communities of interest and population groups in New Zealand society.

Our vision

To lift the productivity of New Zealand and the wellbeing of New Zealanders.

Our work

The Commission provides evidence-based, high-quality analysis and advice about ways to improve productivity in New Zealand. We aim to increase public and political understanding of productivity-related issues and to empower decision makers with the knowledge and solutions to influence and change policy.

Our work programme focuses on conducting inquiries and research on productivity-related matters and promoting public understanding of this. The Commission normally works on two inquiries in parallel.

Undertaking inquiries

Inquiries are big pieces of analysis, typically undertaken over 12 to 15 months. This timeframe recognises the importance of engaging extensively with interested parties and experts to ensure we consider all points of view, obtain the best available information, understand different perspectives, and test ideas. The Government chooses inquiry topics to ensure our work is relevant, and our advice pertains to issues they have an interest in addressing. Once topics are set, we are required to act independently.

Publishing research

The Commission conducts research and publishes papers to provide an evidence base on which to offer advice to improve New Zealand’s productivity. This work includes benchmarking New Zealand’s productivity performance over time, which is presented in our Productivity by the numbers publication. We collaborate and work closely with agencies who are active in productivity research. This allows us to access subject/sector specialists and benefit from the cross- promotion of ideas and insights.

Promoting understanding

We undertake a range of communications activities around our inquiries and research work to educate and promote understanding of productivity-related matters. We aim to reach diverse audiences through outreach activities, opinion journalism, blogging, sponsored media articles, social media and email marketing.

Our governance

The Commission has three part-time Commissioners: Dr Ganesh Nana (Chair), Prof Gail Pacheco and Dr Bill Rosenberg. As the Board, they are accountable to Parliament and report to a responsible minister within Government, currently the Minister of Finance. The Chair and Commissioners are responsible for the effective governance of the Commission. This includes the appointment and performance of the management team, setting and monitoring strategic direction, delivery of and conformance with accountability documents, integrity of processes and the overall health, wellbeing, and sustainability of the organisation (including oversight and management of reputation and risk). Commissioners also oversee the delivery of our work programme and outputs, shaping the scope, content, balance, quality, and presentation of our work.

Looking to the future

Currently the Commission is developing a new strategic plan that focuses on operational and organisational improvements. The high-level strategy developed to date is focused on four key strategic initiatives:

• Communicate and improve access to the Commission’s work.
• Execute comprehensive stakeholder
• Promote productivity and wellbeing
• Ensure our people, processes and systems are all fit for purpose.

The Commission is currently developing the objectives and action plans related to these initiatives and these will be published in our next Annual Report.

Our people

The quality of our people is critical to our success. The Commission aims to attract and retain strong performers in their field, or those who have significant potential to contribute to our research or inquiry work. We employ people who bring diverse skills, disciplines, and backgrounds to benefit our organisation. Once with us, we strive to provide a rewarding environment where excellence is valued.

We place high importance on supporting staff to develop to their full potential and encourage staff to plan and progress their personal development. There has been a growing awareness that deeper understanding of Te Ao Māori is an essential capability to develop in our workplace.

Across all staff positions we typically employ between 15 to 20 people with approximately a 50–50 gender split. They are employed on a mixture of permanent and shorter, fixed-term contracts. We supplement our permanent staff with consultants to bring experience and fresh perspectives, as required, and through secondments to take advantage of expertise across the public sector. We also encourage our staff to take up secondments to develop their skills and experience.

Looking to the future

The Commission retained an external HR company to review HR policies and interview former and current staff and make recommendations, following high turnover of staff in 2021 and the beginning of 2022. The recommendations made in the report were incorporated into operational changes and strategic action plans, to create a positive workplace culture and ensure retention of staff.

Our capabilities

Our work demands a high level of capability in areas such as sourcing information, analysis, process management, engagement, communications and influencing. These capabilities ensure the publication of insightful and influential analysis, findings and recommendations based on the right information from robust processes.

Our key capabilities are measured indirectly through our performance measurement and inform our internal priorities for capability development and the reputation we aspire to as an organisation. This is vital to ensuring our work makes a difference to lift the productivity of New Zealand to improve the wellbeing of New Zealanders.

We value diversity

The Commission values and embraces different and diverse ways of thinking and being. We aim for our thinking and actions to be informed by a diverse range of views from people, groups, and communities across Aotearoa New Zealand. We believe this approach is vital to enhance the credibility, value, and effectiveness of our work.

This year our Diversity and Inclusion Action Plan had two main goals: to develop a knowledge base on diversity and inclusion; and to take steps to build workforce diversity. Actions were progressed against these goals as follows:

1. Build initial information, knowledge, and awareness – to develop and promote a base of knowledge on diversity and inclusion.

• A baseline workplace profile was provided to Commissioners.
• A diversity and inclusion policy was drafted and will be finalised alongside our strategic refresh. This will be implemented with any necessary adjustments to our recruitment and employment processes.
• Identification and implementation of staff awareness and education tools for diversity and inclusion has been discussed with the leadership team and will be progressed in the coming year.

2. Take formative steps to build workforce diversity – to develop and promote a base of knowledge to support processes that enable the employment and retention of a more diverse workforce.

• We recognise the relative lack of women and Māori across the economics profession, and among senior roles. In response, we are trying to focus our recruitment on sourcing strategy(ies), channels, and advertising tools to attract a more diverse range of candidates. We are also pursuing development and leadership opportunities for women in the profession, including the encouragement of links to appropriate networks for staff.
• We developed a careers section on our website to better communicate the Commission’s offering, including our commitment to becoming an equal opportunities employer, and to grow our knowledge and appreciation of Te Ao Māori.

Our Diversity and Inclusion Action Plan for the year ahead will further progress this year’s goals, while incorporating new goals around improving accessibility, attracting more women and Māori, and building a culture and workplace that embraces Te Ao Māori.

Strategic risks and building our reputation

Vital to our strategic success are several attributes outlined below. We see our strategic risks as the inverse of not achieving or sustaining these key areas of success.

When we assess strategic risk, we consider the environment in which we operate in and how we want to be known in that environment:

Making a difference: our outcomes framework

The Commission seeks to influence two strategic outcomes: to lift New Zealand’s productivity and, as a result, lift the wellbeing of New Zealanders.

Through our work, we:

• explore the causes of New Zealand’s weak productivity performance;
• identify the barriers to higher productivity and wellbeing; and
• recommend policies to overcome those barriers.

In producing and publicising research and reports, we aim to inform the public and decision makers, promote debate, and encourage the adoption of policies and behaviours that contribute to lifting productivity and wellbeing. To do this effectively, we must be trusted and provide rigorous and workable advice.

Central to the Commission’s impact and influence is our public consultation and engagement. During each inquiry we engage with a large and diverse group of experts, interested parties, communities, and groups across Aotearoa New Zealand, to provide direct input on specific policy issues and to test ideas. Identifying areas in which policy settings can be improved to enhance productivity and wellbeing is at the heart of the Commission’s work. 

Our outcomes framework summarises how we expect to make a difference, along with the core capabilities and the reputation we wish to develop.

Measuring progress

Measuring the Commission’s progress and impact is challenging. Productivity operates at many levels, with many influences, which may take place over long timeframes. It can be difficult to identify improvements to productivity or wellbeing that can be directly attributed to our work.

The inquiries we work on, the types of analysis we conduct, and the range of community and industry groups we engage with, change significantly from year to year. It is difficult to capture this diversity of work and effort in fixed quantitative targets, so the Commission takes a strong evaluative- based approach to measuring performance.

Once each inquiry is finished, an independent review is done. Every two years an independent review evaluates our economics and research work.

These evaluations use the same output measures to ensure comparability, while ensuring flexibility to incorporate other feedback.

Evaluating performance

The Commission is an independent research and advisory body with no operational ability to run or implement policies. The Government is under no obligation to implement our recommendations, nor to respond to our reports. We rely solely on our ability to skillfully communicate our ideas and our analysis to influence and shape policy.

This influence may be direct and immediate (e.g. through academic, community, public and political recommendation) or over a longer period, after policies are adjusted or adopted.

We do not just produce reports. Analysis and commentary in our reports is disseminated, understood, and used to influence policy and behaviour so that New Zealand improves productivity in the long term.

Achieving policy impact and progress on New Zealand’s productivity and wellbeing performance may only emerge over time. To report on our strategic outcomes, we therefore focus on what analysis and advice we undertook that contributed to increasing the understanding of New Zealand’s productivity challenges.

Our approach to performance measurement can be summarised as follows:

Reporting on our outcomes

Lifting productivity of New Zealand and lifting the wellbeing of New Zealanders

Publishing research

Our research team has been focused on primary research to support our understanding of the inquiry topics. This has included work on how migrants contribute to productivity in New Zealand, migrant labour market pathways and outcomes, and income mobility patterns in New Zealand. The results from these research projects have fed into the work of our Immigration and A Fair Chance for All inquiries. The results were presented at the New Zealand Association of Economists annual conference, as well as several other public seminars and lectures. At the end of this reporting period, they were being prepared for publication as working papers and in peer-reviewed journals.

Penny Mok and Gail Pacheco’s paper Income Protection in the New Zealand Tax-transfer System was published in the peer-reviewed journal New Zealand Economic Papers.

Income Mobility in New Zealand 2007–2020: Combining Household Survey and Census Data, by John Creedy and Quy Ta was featured in the Working Papers in Public Finance series by Victoria University of Wellington in May 2022.

Immigration by the numbers is a comprehensive collection of the immigration trends and quantitative analysis that informed the Commission’s inquiry into immigration settings for New Zealand’s long- term prosperity and wellbeing. The style of the report was built on last year’s successful Productivity by the numbers publication.

We restarted the Productivity Hub¹, in collaboration with the Government Economics Network. This includes a Research Leaders Group², to bring together research leaders from across the government sector. This group includes representatives from Treasury, the Ministry of Business, Innovation and Employment, the Ministry of Foreign Affairs and Trade, New Zealand Infrastructure Commission, Te Puni Kōkiri, the Social Wellbeing Agency, Statistics New Zealand, the Ministry of Transport, and the Reserve Bank of New Zealand.

Undertaking inquiries

Two new inquiries were assigned by the Minister of Finance shortly after the completion of our Frontier Firms inquiry in April 2021.

Immigration: Fit for the future

The Commission received the terms of reference (ToR) from the Minister of Finance for the Immigration inquiry on 12 April 2021. The ToR alongside the inquiry’s call for submissions and issues paper (released in June 2021) set the scene for this work programme from July 2021 to June 2022.

A Fair Chance For All: Breaking the cycle of persistent disadvantage

In June 2021, the Government asked the Commission to scope a new inquiry into the drivers of persistent disadvantage within people’s lifetimes and across generations. As part of scoping, the Government asked us to consult the public on what the terms of reference should cover – a new approach for the Commission. To assist with this, a scoping paper was published on 21 July, with submissions and feedback due by 27 August 2021.

From January through to June 2022 we undertook work to inform the development of our interim report. This included commissioning and/or releasing the following pieces of research:

• Together alone – a review of joined up social services (by consulting economist Julie Fry).
• Te puna kōrero: Understanding persistent disadvantage in Aotearoa New Zealand – a thematic review of existing research into the lived experiences of people living in persistent disadvantage.
• A report on colonisation, racism, and wellbeing, prepared by Haemata
• Analysis of family resources across the early life course and children’s development in Aotearoa New Zealand, using the Growing Up in New Zealand study data set, undertaken by Dr. Kate C. Prickett, Dr. Sarah-Jane Paine, Associate Professor Polly Atatoa Carr Te Ngira and Professor Susan Morton.

We also undertook our own quantitative analysis into persistent disadvantage, linking the Census and the Household Economic Survey, and collaborating with Dr John Creedy at Victoria University of Wellington to examine income mobility patterns in New Zealand over the short to medium term.

The inquiry’s interim and final reports are due to be published in 2022 and 2023 respectively.

New Zealand Firms: Reaching for the frontier

Evaluation – July 2021

Our final report on the Frontier Firms inquiry was published in May 2021. Institute of Directors, General Manager, Guy Beatson conducted an independent expert review of the inquiry and the final report. We also used an online survey and two independently chaired focus groups and interviews with inquiry participants to evaluate the inquiry and final report. These were all published on our website in July 2021.

The expert review found that, overall, the final inquiry report achieved, if not exceeded, high standards for quality policy advice. The review also found we should continue with some practices from the Frontier Firms inquiry to improve our inquiry practice in other areas.

Most focus group participants and interviewees viewed the inquiry favorably. Our staff, engagement and inquiry process drew positive comments. The inquiry’s Māori engagement was welcomed and regarded as appropriate and of a high quality. Our engagement with Māori was useful for our analysis, findings, and recommendations, and promoted goodwill.

Government response and request for a follow-on review – March 2022

The Government released its official response to the Frontier Firms inquiry in March 2022, thanking the Commission for a well-researched, well-evidenced, coherent, and practical inquiry. The Government also appreciated us challenging it to think about where and how to focus its efforts and help guide its economic strategy towards a more productive, sustainable, and inclusive economy.

In its response, the Government asked us to undertake a “follow-on review of Government’s policy settings in 12 months, to determine whether we are shifting the productivity dial and progressing towards a more sustainable and inclusive economy, or whether more radical change is needed.”

We are undertaking this follow-on review from September 2022 to March 2023.

Promoting understanding

We published the draft report of the Immigration– Fit for the future inquiry with our preliminary findings and recommendations in November 2021.

The final report was delivered to the Minister of Finance, on 30 April 2022, with our findings and recommendations, together with an associated report (Immigration by the numbers) containing much of the quantitative evidence generated during the inquiry.

The public rollout of the findings and recommendations of the Immigration inquiry began in June 2022, and included webinars, media activity and a range of public events and meetings with key stakeholders. Ten events were held in June, including two that were open to the public – a launch event on 10 June (attended by 140 people) and a seminar organised in association with Motu Economic and Public Policy Research on 16 June.

Several organisations hosted meetings to discuss the inquiry’s final reports, including NZCTU, FOMA Chairs, Workforce Development Councils, the Employers and Manufacturers Association Members Forum, NZ Aged Care Association, Education New Zealand (the International Education Chief Executives Group), MBIE’s Policy Forum, the Treasury’s Economic Strategy Team (as well as a guest lecture at the Treasury), the Stats NZ DataLab User Forum, and the New Zealand Association of Economists Conference in late June.

An evaluation for the inquiry, including an expert review, focus group evaluation and public survey was undertaken and published on the Commission’s website.

In addition to supporting our inquiries, our E&R team also completed the following pieces of work:

Migration and productivity

Research by the Commission examined how migrants contribute to productivity in New Zealand. Using administrative data on the flows of migrants into and out of New Zealand, visas, earnings, and jobs between 2004 and 2019, our research compared migrant workers with NZ-born workers. Through the lens of a derived ‘productivity-wage gap’ we captured the difference in relative contribution to output and the wage bill. The research found that skilled and long-term migrants make contributions to output that exceed moderately skilled New Zealand-born workers. The higher contribution is likely due to a mix of skill differences and/or effort that is largely reflected in higher wages.

We found tentative evidence that Māori highly skilled NZ-born workers make a stronger contribution to output when they work in firms with higher migrant shares, which suggests complementarities between the two groups or, at least, positive mutual sorting of these groups into higher productivity firms.

Migrant spells and transitions

The Commission examined recent migration trends in New Zealand, focusing on the visa spells and transitions. Visa spells are the time spent by migrants on a visa when they enter and work in New Zealand. Visa transitions describe when migrants change status, such as changing visa category, becoming a New Zealand citizen, or leaving the country. The work looked at visa spells and transitions for migrants arriving between 2000 to 2020, focusing on groups based on the years migrants first arrive. We found that most migrants enter and stay only a year or two before leaving.

Only a small number of migrants ‘visa-hop’ between multiple visas with most only holding two different visas. Many migrants leave after several years in New Zealand. Of those who stay, there has been an increasing trend towards spells on temporary work or student visas before gaining residence visas.

Migrant selection and outcomes

The Commission explored differences in the selection for permanent residence, where employers select for temporary visas in the first stage (demand driven) and the Government controls the second stage (human capital-based selection) through a points-based system. We compared earnings and employment outcomes between residents applying from offshore and those applying from temporary working visas. We looked at the extent to which skilled or highly paid migrants are reflected in selection and investigated whether there is any earnings advantage to pre-residence earnings over time, or whether there is a catch-up with time in New Zealand.

Changing family incomes in New Zealand

This work was conducted in collaboration with the Victoria University of Wellington. The work examined income mobility patterns in New Zealand over the short to medium term. We used a special dataset that tracked the Household Labour Force Survey over the period from 2007 to 2020, using 2013 census data. Just below half of those initially in the bottom decile remained either there or in the second-lowest decile over seven years, while about two-thirds of those initially in the top decile remained either there or in the second-highest decile.

Our approach

To measure our performance, we use a strongly evaluative approach that best aligns with the nature of our work. For our research and inquiries, we collect qualitative and quantitative information through independent expert evaluations, participant surveys and focus groups or interviews.

As per our Statement of Performance, our performance is measured against three broad impact indicators:

• Policies and behaviour change because of our work;
• Discussion and debate are generated from our work;
• Levels of engagement, and responses to, our work.

We then measure our outputs against the following categories:

• Right focus;
• Good process management;
• High-quality work;
• Effective engagement;
• Clear delivery of message;
• Overall

The evaluation, participant surveys and focus groups for the A Fair Chance For All inquiry will be included in the 2024 Annual Report.

Immigration – Fit for the future inquiry process and final report

An independent evaluation of the Immigration inquiry was undertaken to assess the Commission’s performance and learnings for the future. Three external sources of feedback were used – an expert review, focus groups and an online public survey.

The expert review was carried out by Richard Bedford, of Bedford Consulting. All evaluation documents are available on the Productivity Commission website.

The focus group report, prepared for the Commission by Kathy Spencer, collected feedback from 12 people representing industry groups and other stakeholders who were actively involved in the inquiry process. The focus group process included individual interviews, and two small group sessions.

Participants included representatives from Restaurant Association of NZ, Federated Farmers, BusinessNZ, Human Rights Commission, Unite Union, NZNO, University of Otago, E Tū, Aims Global, Asia New Zealand Foundation, Migrant Investor and Entrepreneur Association, and FIRST Union.

The survey, open to the public and promoted through the Commission’s communication channels (including to participants), was run by Survey Monkey through the Commission’s website. It attracted 99 participants in total.

Biennial review of Economics and Research team

Every two years our economics and research function undergo independent review to evaluate the work completed during that period. Professor Robert Buckle completed the sixth review of our Economics and Research team (ERT). Having conducted the previous two reviews (2018 and 2020), Prof Buckle was able to consider how we had responded to his previous recommendations.

During the last two-year period, the ERT received very little funding and was reduced to a single person reporting to a Commissioner as an interim measure. More recently the team has experienced some growth.

The 2020–22 review is available on the Productivity Commission’s website.

“The team is perhaps the strongest it has been for several years.”

Prof Buckle noted that with “the support of the Board and additional financial support”, the Commission had been able to “markedly improve the level of research experience, skill and capacity.” He noted:

• the quality of the research published is of a high standard – it is valuable and valued;
• the development of a work programme that aligns its contributions with the requirements of the Commission’s inquiries, while also enabling the ERT to spend a significant amount of time working on other important productivity topics;
• methods of work involving deeper cooperation, and “significant research and leadership contributions” were made by the team to the Commission’s inquiries;
• there has been an increase in the quality of engagement and collaboration with other stakeholders, particularly those in Government policy agencies.

Impact indicator: Policies and behaviour change because of the Commission’s work

The proportion of our inquiry recommendations implemented by the Government, are the most direct measure of the impact of our work. The Government is under no obligation to implement our recommendations or respond to our reports. However, in practice and in most cases, the Government has issued formal responses to our inquiry reports specifying which recommendations it agrees with and will implement.

As an independent organisation with a strong focus on public interest, we are expected to push the boundaries on complex issues. Done well, our inquiry reports should spark a recalibration of thinking within relevant agencies and other stakeholders. We aim to put difficult issues on the agenda and encourage discussion and action on topics that other agencies consider too sensitive. We will continue to test ideas and challenge the status quo in the interest of improvement. Our focus is on providing the best advice, rather than the most palatable advice.

We look for evidence that our work is increasing understanding of productivity- related matters. We consider this a precursor to increased uptake and understanding of our recommendations that will ultimately lead to better decision- making on the policies and programmes that could lead to improved productivity and wellbeing. We mainly look for this evidence through independent evaluation of our work (via participant surveys, independent expert reviews and focus groups), but also by observing data around our connection and communication with audiences interested in our work.

Impact indicator: Policies and behaviour change because of the Commission’s work

Impact(s) - Policies and behaviour changes because of our work

Immigration – Fit for the future inquiry process and final report

Assessment methods: Independent expert review, focus groups, survey

Biennial review of Economics and Research team

Assessment methods: Independent expert review

Impact indicator: The Commission’s work generates discussion and debate

Where our work generates discussion and debate, we are interested in seeing the diversity of voices in that debate, how our work is being used by people (influencers), particularly those providing commentary on, or input into, policy. We look at how and where our work is cited in Parliament, by academics, industry commentators and the media.

Immigration – Fit for the future inquiry process and final report

Assessment methods: Independent expert review, focus groups, survey

Biennial review of Economics and Research team

Assessment methods: Independent expert review

Impact indicator: Levels of engagement and response with the Commission’s work increase

Feedback from our stakeholders and the wider community indicates the role our work plays in increasing the overall quality of analysis and advice on productivity issues.

Impact(s) - Levels of engagement with, and responses to, our work

Immigration – Fit for the future inquiry process and final report

Assessment methods: Independent expert review, focus groups, survey

Biennial review of Economics and Research team

Assessment methods: Independent expert review

Output measurement: Right focus

Immigration – Fit for the future inquiry process and final report

Assessment methods: Independent expert review, focus groups, survey

Biennial review of Economics and Research team

Assessment methods: Independent expert review

Output measurement: Good process management

Immigration – Fit for the future inquiry process and report

Assessment methods: Independent expert review, focus groups, survey

Biennial review of Economics and Research team

Assessment methods: Independent expert review

Output measurement: High quality work

Immigration – Fit for the future inquiry process and report

Assessment methods: Independent expert review, focus groups, survey

Biennial review of Economics and Research team

Assessment methods: Independent expert review

Output measurement: Effective engagement

Immigration – Fit for the future inquiry process and report

Research reports

Internally written research reports included six discussion papers to help those wishing to be better informed about a wide range of issues relating to immigration in New Zealand.

Draft and final reports

Learnings from engagement meetings and submissions, combined with further research, led to a significant change between the draft and final report. This included a refinement of and, in many cases, new findings and recommendations that would not have been possible without input from a wide range of stakeholders.

Immigration – Fit for the future inquiry process and final report

Assessment methods: Independent expert review, focus groups, survey

Biennial review of Economics and Research team

Assessment methods: Independent expert review

Output measurement: Clear delivery of message

Immigration – Fit for the future inquiry process and report

Assessment methods: Independent expert review, focus groups, survey

Biennial review of Economics and Research team

Assessment methods: Independent expert review

Output measurement: Overall quality

Immigration – Fit for the future inquiry process and report

Assessment methods: Independent expert review, focus groups, survey

Biennial review of Economics and Research team

Assessment methods: Independent expert review

Summary of financial performance

Our full financial statements and accompanying notes are set out later in this report. We made a $963,000 operating surplus, as summarised below.

Output funding and costs

The Commission’s summary of output funding and costs include the direct and indirect costs associated with delivering our core services: inquiries, research and promoting understanding. Dividing our funding in this way allows the Government to determine, at a high level, the mix of our work.

* Revenue from the Crown represents the appropriation received by the Commission and equals the Government’s actual expenses incurred in relation to the appropriation, which is a required disclosure from the Public Finance Act.

End of year reporting requirements as per the Estimates of Appropriations 2021–22 (Finance and Government Administration Sector)

The Commission receives funding from the appropriation ‘Inquiries and Research into Productivity-Related Matters’ under Vote Finance. The Commission’s appropriation is limited to the undertaking of inquiries, and promoting public understanding of, productivity-related matters by the New Zealand Productivity Commission in accordance with the New Zealand Productivity Commission Act 2010.

Under the requirements specified in the Crown Entities Act 2004, section 155, the Commission’s Board is responsible for:

• the preparation of the Commission’s financial statements and statement of performance and the judgements made in them;
• any end-of-year performance information provided by the Commission under section 19A of the Public Finance Act 1989; and
• establishing and maintaining a system of internal control designed to provide reasonable assurance as to the integrity and reliability of the Commission’s financial and non-financial reporting.

In the Board’s opinion these financial statements and statement of performance fairly reflect the financial position and operations of the Commission for the year ended 30 June 2022.

Signed on behalf of the Board:

Ganesh Nana
Chair

Bill Rosenberg
Commissioner & Assurance Committee Chair

Date: 28 February 2023

Independent Auditor’s Report

To the readers of New Zealand Productivity Commission’s financial statements and performance information for the year ended 30 June 2022

The Auditor-General is the auditor of the New Zealand Productivity Commission (the Commission). The Auditor-General has appointed me, Matthew Geddes, using the staff and resources of Audit New Zealand, to carry out the audit of the financial statements and the performance information, including the performance information for an appropriation, of the Commission on his behalf.

Opinion

We have audited:

• the financial statements of the Commission on pages 54 to 69, that comprise the statement of financial position as at 30 June 2022, the statement of comprehensive revenue and expenses, statement of changes in equity and statement of cash flows for the year ended on that date and the notes to the financial statements including a summary of significant accounting policies and other explanatory information; and
• the performance information of the Commission on pages 13 to 48.

In our opinion:

the financial statements of the Commission on pages 54 to 69:

• present fairly, in all material respects:
  • its financial position as at 30 June 2022; and
  • its financial performance and cash flows for the year then ended; and

• comply with generally accepted accounting practice in New Zealand in accordance with the Public Benefit Standards Reduced Disclosure Regime; and

the performance information on pages 13 to 48:

• presents fairly, in all material respects, the Commission’s performance for the year ended 30 June 2022, including:
  • for each class of reportable outputs:
    • its standards of delivery performance achieved as compared with forecasts included in the statement of performance expectations for the financial year; and
    • its actual revenue and output expenses as compared with the forecasts included in the statement of performance expectations for the financial year; and
  • what has been achieved with the appropriation; and
  • the actual expenses or capital expenditure incurred compared with the appropriated or forecast expenses or capital expenditure.
• complies with generally accepted accounting practice in New Zealand.

Our audit was completed on 28 February 2023. This is the date at which our opinion is expressed.

The basis for our opinion is explained below. In addition, we outline the responsibilities of the Board and our responsibilities relating to the financial statements and the performance information, we comment on other information, and we explain our independence.

Basis for our opinion

We carried out our audit in accordance with the Auditor-General’s Auditing Standards, which incorporate the Professional and Ethical Standards and the International Standards on Auditing (New Zealand) issued by the New Zealand Auditing and Assurance Standards Board. Our responsibilities under those standards are further described in the Responsibilities of the auditor section of our report.

We have fulfilled our responsibilities in accordance with the Auditor-General’s Auditing Standards.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of the Board for the financial statements and the performance information

The Board is responsible on behalf of the Commission for preparing financial statements and performance information that are fairly presented and comply with generally accepted accounting practice in New Zealand. The Board is responsible for such internal control as they determine is necessary to enable them to prepare financial statements and performance information that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements and the performance information, the Board is responsible on behalf of the Commission for assessing the Commission’s ability to continue as a going concern. The Board is also responsible for disclosing, as applicable, matters related to going concern and using the going concern basis of accounting, unless there is an intention to merge or to terminate the activities of the Commission, or there is no realistic alternative but to do so.

The Board’s responsibilities arise from the Crown Entities Act 2004 and the Public Finance Act 1989.

Responsibilities of the auditor for the audit of the financial statements and the performance information

Our objectives are to obtain reasonable assurance about whether the financial statements and the performance information, as a whole, are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit carried out in accordance with the Auditor-General’s Auditing Standards will always detect a material misstatement when it exists. Misstatements are differences or omissions of amounts or disclosures, and can arise from fraud or error. Misstatements are considered material if, individually or in the aggregate, they could reasonably be expected to influence the decisions of readers, taken on the basis of these financial statements and the performance information.

For the budget information reported in the financial statements and the performance information, our procedures were limited to checking that the information agreed to the Commission’s statement of performance expectations.

We did not evaluate the security and controls over the electronic publication of the financial statements and the performance information.

As part of an audit in accordance with the Auditor-General’s Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. Also:

• We identify and assess the risks of material misstatement of the financial statements and the performance information, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• We obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Commission’s internal control.
• We evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board.
• We evaluate the appropriateness of the reported performance information within the Commission’s framework for reporting its performance.
• We conclude on the appropriateness of the use of the going concern basis of accounting by the Board and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Commission’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements and the performance information or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Commission to cease to continue as a going concern.
• We evaluate the overall presentation, structure and content of the financial statements and the performance information, including the disclosures, and whether the financial statements and the performance information represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the Board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Our responsibilities arise from the Public Audit Act 2001.

Other information

The Board is responsible for the other information. The other information comprises the information included on pages 1 to 12, 49 and 70 but does not include the financial statements and the performance information, and our auditor’s report thereon.

Our opinion on the financial statements and the performance information does not cover the other information and we do not express any form of audit opinion or assurance conclusion thereon.

In connection with our audit of the financial statements and the performance information, our responsibility is to read the other information. In doing so, we consider whether the other information is materially inconsistent with the financial statements and the performance information or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on our work, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Independence

We are independent of the Commission in accordance with the independence requirements of the Auditor-General’s Auditing Standards, which incorporate the independence requirements of Professional and Ethical Standard 1: International Code of Ethics for Assurance Practitioners issued by the New Zealand Auditing and Assurance Standards Board.

Other than in our capacity as auditor, we have no relationship with, or interests in, the Commission.

Matthew Geddes
Audit New Zealand
On behalf of the Auditor-General Wellington, New Zealand

Statement of comprehensive revenue and expense

for the year ended 30 June 2022

The accompanying notes form part of these financial statements. Explanations of major variances from budget are provided in note 17.

Statement of changes in equity

for the year ended 30 June 2022

The accompanying notes form part of these financial statements. Explanations of major variances from budget are provided in note 17.

Statement of financial position

as at 30 June 2022

The accompanying notes form part of these financial statements. Explanations of major variances from budget are provided in note 17.

Statement of cash flows

for the year ended 30 June 2022

The accompanying notes form part of these financial statements. Explanations of major variances from budget are provided in note 17.

Reconciliation of net surplus/(deficit) to net cash flow from operating activities

The accompanying notes form part of these financial statements. Explanations of major variances from budget are provided in note 17.

Statement of accounting policies

Reporting entity

The New Zealand Productivity Commission Te Kōmihana Whai Hua o Aotearoa (the Commission) is a Crown entity in terms of the Crown Entities Act 2004. It was established under the New Zealand Productivity Commission Act 2010 and its parent is the Crown. The Commission’s principal activities are to:

• undertake in-depth inquiries on topics referred to it by the Government;
• carry out productivity-related research that assists to improve productivity over time; and
• promote public understanding of productivity-related matters.

The Commission is a public benefit entity (PBE) for financial reporting purposes. The financial statements for the Commission are for the year ended 30 June 2022, and were approved by the Board on 28 February 2023.

Basis of preparation

The financial statements have been prepared on a going concern basis, and the accounting policies have been applied consistently throughout the period.

Statement of compliance

The financial statements have been prepared in accordance with the requirements of the Crown Entities Act 2004, which includes the requirement to comply with generally accepted accounting practice in New Zealand (NZ GAAP).

The Commission has applied the suite of Tier 2 Public Benefit Entity International Public Sector Accounting Standards (PBE IPSAS 1 RDR 28-3) in preparing the 30 June 2022 financial statements. The Commission has expenses of less than $30 million.

Measurement base

The financial statements have been prepared on a historical cost basis. Cost is the fair value of the consideration given in exchange for assets.

Functional and presentation currency

The financial statements are presented in New Zealand dollars and all values are rounded to the nearest thousand dollars ($000). The functional currency of the Commission is New Zealand dollars.

Changes in accounting policies

The International Financial Reporting Interpretations Committee issued an agenda decision whereby a customer does not recognise an intangible asset from customisation and configuration costs arising from software as a service arrangement if the supplier demonstrates control of the software. The new accounting policy is effective from 1 July 2021 and must be applied retrospectively.

There have not been any implementation costs capitalised from software as a service arrangement, therefore, this change in accounting policy does not have an impact on the Commission.

There have been no other changes in accounting policies during the financial year.

Comparatives

When the presentation or classification of items in the financial statements are amended or accounting policies are changed, comparative figures are restated to ensure consistency with the current period, unless it is impractical to do so.

Accounting standard effective 30 June 2022

An amendment to PBE IPSAS 2 Cash Flow Statements require entities to provide disclosures that enable users of financial statements to evaluate the changes in liabilities arising from financing activities, including both changes arising from cash and non-cash changes. The Commission does not have cash flow from financing activities, therefore, a disclosure has not been presented.

Standards issued and not early adopted

Standards and amendments, issued but not yet effective, that have not been early adopted are:

PBE IPSAS 41 Financial Instruments

The XRB issued PBE IPSAS 41 Financial Instruments in March 2019. This standard supersedes PBE IFRS 9 Financial Instruments, which was issued as an interim standard. It is effective for reporting periods ending on or after 30 June 2023. Although the Commission has not assessed the effect of the new standard, it does not expect any significant changes as the requirements are similar to PBE IFRS 9. The Commission does not intend to adopt the standard early.

PBE FRS 48 Service performance reporting

PBE FRS 48 replaces the service performance reporting requirements of PBE IPSAS 1 and is effective for reporting periods beginning on or after 30 June 2023. The Commission has determined the main impact of the new standard is that additional information will need to be disclosed on those judgements that have the most significant effect on the selection, measurement, aggregation, and presentation of service performance information.

Significant accounting policies

The significant accounting policies which materially affect the measurement of financial performance, position and cash flows have been applied consistently for all reporting periods covered by these financial statements. The policies satisfy the concepts of relevance and reliability ensuring the substance of the underlying transactions or other events is reported. Significant accounting policies are included in the notes to which they relate.

Goods and services tax

All items in the financial statements are presented exclusive of goods and services tax (GST), except for receivables and payables, which are presented on a GST-inclusive basis. Where GST is not recoverable as input tax then it is recognised as part of the related asset or expense. The net GST recoverable from, or payable to Inland Revenue (IR) is included as part of receivables or payables in the Statement of Financial Position.

The net GST paid to, or received from IR, including the GST relating to investing and financing activities, is classified as a net operating cash flow in the Statement of Cash Flows.

Income tax

The Commission is a public authority and consequently is exempt from income tax under section CW 38 of the Income Tax Act 2007. Accordingly, no provision has been made for income tax.

Foreign currency transactions

Foreign currency transactions are translated into New Zealand dollars (the functional currency) using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the surplus or deficit.

Budget figures

The budget figures are derived from the Statement of Performance Expectations as approved by the Board. The budget figures are unaudited and have been prepared in accordance with NZ GAAP, using accounting policies that are consistent with those adopted by the Board in preparing these financial statements.

Performance outputs

Direct costs are charged directly to outputs. Research personnel costs are allocated to outputs based on the time spent. The indirect costs of support groups and overhead costs are charged to outputs based on the proportion of direct costs of each output.

Critical accounting estimates and assumptions

In preparing these financial statements the Commission has made estimates and assumptions concerning the future. These estimates and assumptions may differ from the subsequent actual results. Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Critical judgements in applying accounting policies

Management has exercised the following critical judgements in applying accounting policies:

Leases classification

Determining whether a lease agreement is a finance lease, or an operating lease requires judgement as to whether the agreement transfers substantially all the risks and rewards of ownership to the Commission. Judgement is required on various aspects that include, but are not limited to, the fair value of the leased asset, the economic life of the leased asset, whether or not to include renewal options in the lease term and determining an appropriate discount rate to calculate the present value of the minimum lease payments. Classification as a finance lease means the asset is recognised in the Statement of Financial Position as property, plant and equipment, whereas for an operating lease no such asset is recognised. The Commission has exercised its judgement on the appropriate classification of equipment leases and has determined that none of the lease arrangements are finance leases.

Breach of statutory deadline

Section 156(1)(a) of the Crown Entities Act 2004 required the Commission to provide the Auditor-General with the Commission’s financial statements and statement of performance by 30 September 2022. The Commission was only able to provide the Auditor-General with the statement of performance in December 2022. This meant the Auditor-General was unable to deliver an audit report by 31 December 2022, as required by Section 156(3)(b) of the Crown Entities Act 2004. Delivery of the Statement of Performance to Audit New Zealand was delayed due to Commission staff capacity and Audit NZ availability.

Notes to the financial statements

Note 1 Revenue

Revenue is measured at fair value of consideration received or receivable. Revenue is derived through the provision of outputs for the Crown, services to third parties and investment income.

Revenue from the Crown

Revenue from the Crown transactions are considered to be non-exchange transactions. The Commission is primarily funded through revenue received from the Crown. The funding is restricted in its use for the purpose of the Commission meeting its objectives as specified in its founding legislation and the scope of the relevant government appropriations. Apart from these general restrictions, the Commission considers there are no conditions attached to the funding.

Revenue from the Crown is recognised as revenue when earned and is reported in the financial period to which it relates. The fair value of revenue from the Crown has been determined to be equivalent to the amounts due in the funding arrangements.

Interest

Interest revenue is recognised using the effective interest method.

Other revenue

Other revenue transactions are considered to be exchange transactions. They are personnel costs recovered for employees who work on secondment in other organisations.

Other revenue is recognised as revenue when earned and is reported in the financial period to which it relates.

Note 2 Personnel costs

Personnel costs are recognised in the period to which they relate.

Superannuation schemes

Defined contribution schemes

Obligations for contributions to KiwiSaver are accounted for as a defined contribution superannuation scheme and are recognised as an expense in the surplus or deficit as incurred. The Commission also operates a ‘total remuneration’ policy, such that employer KiwiSaver contributions are part of total remuneration and not an additional benefit.

Defined benefit schemes

The Commission does not make employer contributions to any defined benefit superannuation schemes.

Employee remuneration

Key personnel compensation

Key management personnel are Commissioners, Directors.

Board fees

Commissioners are appointed by the Crown and are the Board for the purposes of the Crown Entities Act 2004. All Commissioners are part-time and their fee is set by the Remuneration Authority.

During the financial year, payments made, or payable to Lesley Mackle, committee member appointed by the Board, but who is not a Board member, was $4,000 (2021: $7,000).

The Commission has not provided a deed of indemnity to Board members for activities undertaken in the performance of the Commission’s functions. The Commission has not affected Directors’ and Officers’ liability and professional indemnity insurance cover during the financial year in respect of the liability or costs of Board members and employees. No Board or committee members received compensation or other benefits in relation to cessation (2021: Nil).

Note 3 Other expenses

Office rental

The non-cancellable operating lease expense relates to the lease of the 15th floor of Fujitsu Tower in Wellington. The lease expires in March 2025. The Commission as lessee exercised its right to renew in April 2016 with a rental rebate of $1,031.92 (GST exclusive) per month for 48 months from April 2021. A rental review was completed and applied from Oct 2021.

As the lessor retains substantially all the risk and rewards of ownership of the leased property, the operating lease payments are recognised in the surplus or deficit only in the period in which they occur.

Any lease incentive received or obligations to make good on the condition of the leased premises are recognised in the surplus or deficit over the term of the lease.

The future aggregate minimum lease payments to be paid under non-cancellable operating leases are as follows:

Note 4 Cash and cash equivalents

Cash and cash equivalents include operating and savings bank accounts held with Westpac. The carrying value of cash at bank and cash equivalents approximates fair value.

The Commission is only permitted to spend its cash and cash equivalents within the scope and limits of its appropriation.

Note 5 Debtors and other receivables

Debtors and other receivables are initially measured at fair value and subsequently measured at amortised cost using the effective interest method. The carrying value of debtors and other receivables approximates their fair value.

All trade debtors are due within 30 days. Trade debtors have been assessed for impairment based on expected credit losses. No provision for expected credit losses have been made as at 30 June 2022 (2021: $38,000).

Note 6 Property, plant and equipment

Property, plant and equipment consists of the following asset classes: information technology equipment, furniture, office equipment, and leasehold improvements. The capitalisation thresholds are:

• Information technology equipment
  $500 and over

• Furniture
  No threshold

• Office equipment
  $500 and over

• Leasehold improvements
  No threshold

Additions

An item of property, plant and equipment is recognised as an asset only when it is probable that the future economic benefits or service potential associated with the item will flow to the Commission beyond one year or more, and the cost of the item can be measured reliably. Property, plant and equipment is recorded at historical cost less accumulated depreciation and any impairment losses. Depreciation on items of property, plant and equipment acquired in stages does not commence until the item of property, plant and equipment is in its final state and ready for its intended use. Subsequent expenditure that extends the useful life or enhances the service potential of an existing item of property, plant and equipment is capitalised. All other costs incurred in maintaining the useful life or service potential of an existing item of property, plant and equipment are recognised in the surplus or deficit as expenditure when incurred.

Disposals

Gains or losses arising from the sale or disposal of an item of property, plant and equipment are recognised in the surplus or deficit in the period in which the item of property, plant and equipment is sold or disposed of.

Depreciation

Depreciation is provided on a straight-line basis on all asset components to allocate the cost of the asset (less any estimated residual value) over its useful life. The residual values and remaining useful lives of property, plant and equipment are reviewed annually. This review includes a test of impairment to ensure the carrying amount remains recoverable. Any impairment losses are recognised in the surplus or deficit. The estimated useful lives of the major asset classes are:

• Information technology equipment
  3 to 5 years

• Furniture
  3 to 10 years

• Office equipment
  5 to 10 years

• Leasehold improvements
  3 to 10 years

Leasehold improvements are depreciated over the unexpired period of the lease or the estimated remaining useful lives of the improvements, whichever is the shorter. The residual value and useful life of an asset is reviewed, and adjusted if applicable, at each financial year end.

Property, plant and equipment have been assessed for impairment and no provisions for impairment have been made.

Note 7 Intangible assets

Software acquisition

Computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. Staff training costs are recognised as an expense when incurred. Costs associated with maintaining computer software are recognised as an expense when incurred. Assets are capitalised if the purchase price is $5,000 or greater.

Amortisation

The carrying value of an intangible asset with a finite life is amortised on a straight-line basis over its useful life. Amortisation begins when the asset is available for use and ceases at the date that the asset is derecognised. The amortisation charge for each financial year is recognised in the surplus or deficit. The Commission’s intangible assets are acquired software with useful life between 3 to 15 years.

Note 8 Creditors and other payables

Creditors and other payables are initially measured at fair value and subsequently measured at amortised cost using the effective interest method. Creditors and other payables are non-interest bearing and are settled on commercial terms and conditions, normally 30 days or less. Therefore, the carrying value of creditors and other payables approximates their fair value.

Note 9 Lease incentive

Any unamortised lease incentive received is recognised as a liability in the Statement of Financial Position.

Note 10 Employee entitlements

At balance date, any unpaid employee entitlements earned by employees for salaries and annual leave are recognised as a liability in the Statement of Financial Position and recognised in the surplus or deficit. Entitlements are calculated on an actual entitlement basis at current rates of remuneration. The Commission recognises a liability and an expense for bonuses where it is contractually obliged to pay them, or where a past practice has created a constructive obligation. No provision has been made for sick leave as all sick leave is non-vesting and the average sick leave to be taken in future years by employees of the Commission is estimated to be less than the annual entitlement for sick leave.

The Commission does not offer retirement or long service leave benefits to its employees.

Note 11 Provisions

A provision is recognised for future expenditure of uncertain amount or timing when there is a present obligation (either legal or constructive) as a result of a past event, it is probable that expenditure will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The Commission is required at the expiry of the lease term to make good any damage caused to its leased office premises, and to remove any fixtures or fittings installed by the Commission. The Commission has the option to renew this lease, which affects the timing of expected cash outflows to make-good the premises. The cash flows associated with provision are expected to occur in March 2025. Information about the leasing arrangement is disclosed in note 3.

Movements within the provision:

Note 12 Equity

Equity is measured as the difference between total assets and total liabilities. Equity is disaggregated and classified into the following components:

• contributed capital
• accumulated surplus / (deficit)

The Commission is subject to the financial management and accountability provisions of the Crown Entities Act 2004, which impose restrictions in relation to borrowings, acquisition of securities, issuing guarantees and indemnities, and the use of derivatives. The Commission manages its equity as a by-product of prudently managing revenues, expenses, assets, liabilities, investments, and general financial dealings to ensure the Commission effectively achieves its objectives and purpose, while remaining a going concern.

Note 13 Contingencies

The Commission has no contingent liabilities and no contingent assets as at 30 June 2022 (2021: Nil).

Note 14 Events after the balance date

There were no significant events after balance date (2021: Nil).

Note 15 Financial instruments

Financial instrument risks

The Commission is a party to financial instrument arrangements as part of its everyday operations. These financial instruments include bank accounts, accounts receivable, and accounts payable. The Commission has policies to manage the risks associated with financial instruments. The Commission seeks to minimise exposure from financial instruments and does not enter into speculative financial instrument transactions.

Market risk

Interest rate risk

Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. Cash flow interest rate risk is the risk that cash flows from a financial instrument will fluctuate because of changes in market interest rates. The Commission’s exposure to cash flow interest rate risk is limited to on-call bank accounts and short-term deposits, arising from the investment of surplus cash due to the timing of cash inflows and outflows.

Credit risk

Credit risk is the risk that a third party will default on its obligation to the Commission, causing it to incur a loss. The Commission invests surplus cash with registered banks. In the normal course of business, the Commission is exposed to credit risk from cash and term deposits with banks, debtors and other receivables. For each of these, the maximum credit exposure is best represented by the carrying amount in the Statement of Financial Position. Westpac Banking Corporation is the Commission’s main bank and has a S&P Global Ratings of AA-.

Liquidity risk

Management of liquidity risk

Liquidity risk is the risk that the Commission will encounter difficulty raising liquid funds to meet commitments as they fall due. The Commission has a low exposure to liquidity risk as it does not enter into credit arrangements, except for those available from suppliers as part of normal operating agreements. The Commission manages liquidity risk by continuously monitoring forecast and actual cash flow requirements and aims to maintain sufficient funds in current and on-call bank accounts and short-term fixed deposits to meet forecast liquidity requirements.

Note 16 Related party transactions

The Commission is a wholly-owned entity of the Crown. Related party disclosures have not been made for transactions with related parties that are within a normal supplier or client/recipient relationship on terms and conditions no more or less favourable than those that is reasonable to expect the Commission would have adopted in dealing with the party at arm’s length in the same circumstances. Further, transactions with other government agencies (for example, Government departments and Crown entities) are not disclosed as related party transactions when they are consistent with the normal operating arrangements between government agencies and undertaken on the normal terms and conditions for such transactions.

Key personnel

Commissioners are appointed by the Crown and are the Board for the purposes of the Crown Entities Act 2004. In addition to their role with the Commission, Commissioners have other interests and may serve in positions with other organisations, including organisations to which the Commission is related. Potential conflicts of interest are declared in an interests register. No Commissioner was exempted during the year from the requirement to not vote or take part in any decision despite being interested.

Refer to note 2 for a breakdown of key management personnel compensation.

Note 17 Explanation of major variances against budget

The net surplus for the Commission, from 1 July 2021 to 30 June 2022 was $963,000 (2020–21: net surplus of $978,000). In terms of the surplus of $963,000, the key area of underspend was $616,000 due to personnel vacancy lag particularly in senior positions, $177,000 mainly due to Commissioner vacancy and $188,000 in communications due to a change in planned communications activity.

Board

Dr. Ganesh Nana - Chair

Dr. Diane Ruwhiu - Commissioner

Dr. Bill Rosenberg - Commissioner

Leadership team

Shelley Catlin - Director, Operations

Philip Stevens - Economics & Research Director

Julian Wood - Inquiry Director

Catherine Proffitt - Inquiry Director