The truth is business regulation is now right out of control. The quantity and complexity of business regulation today is eating away at the entrepreneurial spirit of Australian business.”
Who said this? Kevin Rudd, in an address to the National Press Club in April 2007. Unfortunately, however, neither prime minister Rudd nor Gillard solved these problems – they only exacerbated them.
Out of 148 countries surveyed by the World Economic Forum, Australia ranks a sad 128th for “burden of government regulation”, down from 96th the year before. The most significant legislative changes over recent years, the carbon tax, the mining tax, the national broadband network and changes to the Fair Work Act, all escaped detailed scrutiny following exemptions granted by Rudd and Gillard. In fact, the independent Borthwick-Milliner review, commissioned by Labor last year, found “a widespread lack of acceptance of and commitment by ministers and agencies” to the regulatory impact assessment process.
We need a new approach.
Questions must be asked first before any new regulations are passed. What is their purpose? Their cost? Their impact on new entrants? And their effectiveness in managing risk? Only then, when it is absolutely necessary, with no sensible alternatives available, should we proceed with regulation.
We need a new conception of acceptable risk and we need to better understand the cumulative impact of regulation on business decision-making. Business is not sentimental and capital is mobile.
Politicians who support new regulation are, in the words of former Productivity Commission chairman Gary Banks, “often rewarded with public acclaim as tangible evidence that the government is ‘doing something’ ”. These “uneven political pressures”, said Banks, are “the antithesis of good regulatory process”. The incentives are simply all wrong. Their cumulative impact is to deter investment and innovation and stifle productivity.
This is why the Abbott government is determined to change course. We will implement a series of reforms which will hold both ministers and the bureaucracy to greater account. Cabinet submissions proposing legislative changes with a significant regulatory impact will no longer be exempted from the regulatory impact assessment process.
Ministers have been tasked to establish designated units within their own departments to advise on deregulation priorities while each minister will appoint an advisory committee with business representation to provide advice on where regulation can be cut. Senior members of the public service will have their remuneration directly linked to their performance in reducing red and green tape and two parliamentary sitting days will be set aside for repealing legislation each year.
All this will be overseen by the Prime Minister and his department which will subsume the deregulation unit and the Office of Best Practice Regulation previously located in Finance.
Regulators too will be subject to the new approach. The government will be instructing the Productivity Commission to prepare a framework for auditing the performance of regulatory agencies.
As the Institute of Company Directors has said, “regulators have tended to adopt an unduly risk-averse approach to the administration of regulation and are often overly bureaucratic in their interactions with business”.
If we are able to enhance the effectiveness and efficiencies of key bodies such as the ATO, ACCC, ASIC and APRA in the way they administer regulations, it will be a big step forward in generating the cultural change we so need.
Reinvigorating the COAG agenda will also be important.
We are kidding ourselves if we think that new far-reaching regulatory regimes will not have a negative impact on the investment pipeline and jobs. It is business not government that creates real wealth and long This is why the deregulation agenda is just so urgent and important.