Red Tape on a Roll and it Must Stop

The Age

By Katie Lahey
Chief Executive
Business Council of Australia 

Business concern over red tape is a perennial issue – a bit like farmers complaining about the weather. But Australian businesses large and small have been hit by such a cloudburst of red tape in recent years that it deserves far greater attention – and action – than ever before.

Statistics compiled by the Business Council of Australia tell a story of regulation growing at an unprecedented rate and posing long-term threats to our economy.

They also highlight the need for an urgent rethink by governments at all tiers of the purpose of red tape and how it gets made.

Regulation is truly Australia’s growth industry. Our parliaments have become regulation factories, producing more laws and red tape than at any time in our history.
 
Regulation is now growing at 10 per cent a year – three times the economic growth rate.

More pages of legislation have passed the Commonwealth Parliament in the 14 years between 1990 and 2004 than in the preceding 90 years.
The federal and state parliaments added 33,000 pages of new law to the statute and rule books in 2003.

In 2003, the state with the greatest volume of new legislation, Queensland, added another 8700 pages of laws and rules. And in Victoria there are 69 state business regulators policing 26,000 pages of rules and regulations.

Increasing amounts of business time and resources that would otherwise be directed to growth plans, innovation and improving competitiveness are being diverted into costly paperwork and box-ticking.

OECD estimates say the Australian small business sector is groaning under compliance costs of more than $17 billion a year.

Manufacturers are shouldering some $680 million of costs every year just to meet regulatory compliance obligations.

Overseas experience suggests that a figure of 8 per cent of Australia’s GDP soaked up by red tape and compliance costs is not an unreasonable estimate.

Regulation costs and burdens are not just confined to business. They have direct costs for the community.

The vast majority of tax returns are lodged through tax agents, while federal tax legislation has grown from 3000 to 10,000 pages in a decade.
A recent Victorian Competition and Efficiency Commission found that red tape was adding $1500 to the cost of building homes in Victoria and these costs were being passed on to the consumer.

Even volunteer organisations are losing personnel because of the endless form-filling and liability requirements, according to a recent survey in Newcastle.

All this is not an argument against regulation per se.

Quality regulation is essential to a sophisticated, globally competitive economy and a fair and just society like Australia.

The BCA’s concern is that the sheer weight of regulation-making is overwhelming the quality controls that should ensure regulation is a means to an end, not an end in itself.

Much of the regulation manufactured by governments in Australia ignores or overlooks the economic and community costs of new red tape, or whether regulation already in place can do the job.

When business complains, politicians typically respond with promises to dump this or that piece of red tape – this is like chopping off the top of a weed but not removing its roots.

Why has red tape become such a problem now? Ironically, the more prosperous a society, the more it seeks to be shielded from risk.

As Tony Blair recently noted in a speech in which he committed Britain to systematically tackling its own regulatory blow-out, Western societies have become increasingly risk-averse, demanding regulation to anticipate each and every unforeseen contingency.

In business, let alone life, that is just not realistic.

Economic prosperity also makes it easy to mask the true impacts and costs of the red tape blow-out.

It is much easier for our political leaders, when faced with political or community pressure when things go wrong, to revert to a modus operandi of “regulate first, ask questions later” without needing to be overly concerned with the true cost of a proposal.

Little thought is given by governments to how the regulation blow-out also drains their own – read taxpayers’ – resources in regulation administration and policing.

The BCA has nominated the regulatory blow-out as one of its four major targets for reform to make sure Australia locks in its current prosperity for the long term.

We have proposed to governments a three-step plan for action to help combat Australia’s red tape blow-out.

First, the current systems must be overhauled to make sure all new regulation fully takes account of costs to business and avoids costly and undesirable overlap and duplication.

The system must allow for a regular review of red tape to adjust, modernise and streamline it to meet the needs of its business and community consumers.

Second, we must do a massive spring-clean of all existing regulation to improve or eliminate regulation that is unnecessary, duplicated or outdated.

Third, and perhaps most difficult, we must tackle the broader problem of overlap and lack of co-ordination between the Commonwealth and states, and between the states themselves.

The fractious nature of our federalist system discourages uniformity and scotches debate on sensible streamlining and rationalisation.
As an economy and a nation we clearly can’t afford to continue creating regulation at the current rate.

Other countries – notably many of our competitors – have already recognised they have a similar problem and have acknowledged its potential threat.

What’s more, they are actively reviewing their existing regulation-making systems and culling unnecessary or outdated regulation.

For Australia to stay competitive, we need to address the red tape deluge now.