Essential Reform That Time Forgot

The Australian Financial Review

By Greig Gailey
President
Business Council of Australia

Australia sees itself as a single, national economy. Yet despite this unified image we present to the world, there’s a well-entrenched counter trend that is in effect fragmenting our domestic economy into increasingly complex and costly units.

Against this backdrop of an economy that has been increasingly internationalised in the past 20 years, the state of business regulation in Australia continues to be the reform that time forgot.

In 2008, we continue to have eight states and territories each seeking to regulate in their own way, in some cases duplicating federal regulation.

From a business perspective, Australia is not one market, it is nine.

This outmoded system means that the 32,000 businesses operating in more than one state having differing and often conflicting regulatory systems across a range of business areas including occupational health and safety, building regulation, product safety, business tax and trade practices.

All this slows business processes, distorts resource allocation and dampens productivity, with the cost to business and the wider economy estimated to be as high as $16 billion a year – costs that are ultimately passed on to consumers as higher prices.

The Council of Australian Governments (COAG) has committed to address 10 of the worst offenders in terms of inconsistent business regulation areas – known as regulatory ‘hot spots’.

But as so often happens with COAG, the rhetoric has never translated into reform reality as none of the 10 hot spots has evolved into a national system of regulation.

Now, with a new spirit of federal–state cooperation and a resurgence of COAG as a credible vehicle for economic reform, the time is ripe for this to be addressed once and for all.

That is why the Business Council of Australia is calling for COAG leaders to now agree that their governments – national, state and territory – implement a single set of business rules and regulations, in reality a seamless economy.

This first step is complete harmonisation of the already identified 10 COAG hot spots by the end of 2009.

This would pave the way for a seamless economy to be put in place by the states and Canberra by 2010.

If governments cannot agree, the BCA urges Canberra to step in and create national business schemes in key areas of regulation, allowing companies to opt out of inefficient state and territory systems.

The BCA’s seamless regulatory economy does not require that every aspect of the regulation of trade and commerce be identical across Australia, or exclude states.

There is no reason, for example, why states should still not be able to compete for investment with different rates of payroll tax and stamp duty while harmonising the base on which those taxes are calculated.

The advantage of businesses being covered by just one set of regulatory requirements across Australia has been obvious for a long time.

What we now need is strong leadership to address the regulatory blow-out by finally turning good intentions into meaningful reform.

Download the 'seamless' economy paper