Improving Regulation Requires Sharper Focus on Regulators

Australia’s corporate regulators might be the envy of the world, but considerable opportunities remain for improving their oversight, a new assessment by the Business Council of Australia has found.

In a paper released today, Improving Australia’s Regulatory System, the Business Council has assessed the governance and accountability mechanisms applied by the federal government to the key regulators.

Following the assessment, four key actions are being proposed to improve the oversight of regulators. These actions are in addition to the need to improve the regulatory system overall, including the repeal of the worst regulation implemented in recent years.

“In recent years the federal government had turned a blind eye to good governance like Ministerial Statements of Expectation and engaging regulators in initiatives to reduce red tape,” Business Council Chief Executive Jennifer Westacott said.

“The new government has strongly committed to improve Australia’s regulation system, including an ambitious target to cut red tape costs by $1 billion, and it has made a good start with moves to repeal the carbon and mining taxes, and create a one-stop-shop for environmental approvals.

“What is clear is delivering on the government’s commitment will also require greater pressure to be applied on regulators to ensure that they balance effective enforcement with greater efficiency to reduce the cost and burden on regulated parties.

“When business talks about the ‘dead hand’ of regulation imposing unnecessary costs and holding back business investment and job creation, the focus often turns to the law, but our assessment highlights opportunities to improve the administration of the law.

“While our key regulators must be independent, they must also operate in an environment with incentives to better understand business and minimise regulatory burdens, including those arising from delays and uncertainty.

“Governance of the key regulators is not what you would expect in a high-performing regulatory system despite the rapid growth in the resources of many regulators, with some growing at a faster rate than the budget and the economy over the past decade,” Ms Westacott said.

The paper calls for four actions that should be implemented as a priority:

  • legislating the mandatory preparation of Regulation Impact Statements
  • legislating a new performance and accountability code for all major regulators, including the establishment of an Inspector-General of Regulation
  • requiring any regulation which imposes a significantly increased red tape burden to have an equivalent offsetting red tape reduction within the same portfolio
  • productivity payments from the Commonwealth to the states for good regulation performance.

The paper also includes a number of other recommendations for governments to adopt which focus on stopping the flow of poor regulation, the performance and accountability of regulators, and reducing the stock of regulation.

A key task in reducing the stock of regulation is the need for the federal government to take a systematic approach to repealing the worst regulation of recent years, including:

  • the water trigger in the Environment Protection and Biodiversity Act
  • the worst amendments to the Fair Work Act such as expanded right of entry
  • the Australian Jobs Act 2013.

Also, the Productivity Commission should be charged with helping to guide red tape reduction by investigating and making recommendations to address the cumulative burden of regulation on different sectors of the economy on a rolling basis.

“The Business Council accepts regulation is important to uphold citizens’ rights and provide legitimate safeguards, but it is not in the community’s interests if it poses unnecessary costs on businesses which reduce their capacity to adapt to change and compete and discourages investment and job creation,” Ms Westacott said.

“A key to any country’s success is the efficiency of its regulatory system, but with the World Economic Forum Global Competitiveness Index ranking us 128 out 148 nations, regulation is fast becoming our Achilles heel.

“With Australia seeking to improve its trade and engagement with the world, particularly with the growth region of Asia, and with several free trade agreements under negotiation, our regulatory system needs to be a competitive advantage.

“The Australian Parliament, and all governments around the country, must accept our regulatory system is now a major problem holding us back and that reducing the cost of regulation, including repealing bad regulation, is essential to ensure a stronger, more prosperous future.

“The Productivity Commission estimated successful implementation of the business regulation reforms under COAG’s Seamless National Economy agenda would have cut business costs by $4 billion, but this has not been realised.

“Despite the huge promise, COAG’s Seamless National Economy agenda has failed to make much headway on the ground and has in fact been overtaken by the continuing surge of new regulation and the collapse of good regulation-making process in many cases.

“COAG has to recommit to the deregulation agenda but concentrate on those things that will realise the greatest gains for productivity and competitiveness.

“It’s time to make a more efficient regulatory system, including better-performing regulators, one of the top priorities for economic policy setting over the next five years,” she said.

Improving Australia’s Regulatory System

Action Plan for Enduring Prosperity: Rethinking our Approach to Regulation and Governance (July 2013)