Red-Tape Removal Gets Green Light

The Australian Financial Review


By Katie Lahey
Chief Executive
Business Council of Australia

The Business Council of Australia applauds the federal government's decision last week to accept most of the recommendations in the Banks taskforce report on reducing business red tape.

The acceptance in part or whole of 158 of 178 recommendations represents a giant step forward for Australia's economic efficiency and the removal of a huge and costly burden for businesses of all sizes.

In a changing, global economy we must continue to monitor the impact of measures to ensure our regulatory framework is not preventing us from keeping pace with other countries. That is why the BCA is particularly pleased the government's response includes measures to prevent the explosion of unnecessary red tape in the future, including requirements for cost-benefit analyses of new regulations and five-year reviews.

The challenge to remove unnecessary red tape is not complete. Much of the regulatory burden faced by business is imposed at the state level, and for the government's reforms to be effective, the states must now work with Canberra to achieve a nationally co-ordinated red-tape reform process.

When the BCA released its regulation action plan in May 2005, it came as no surprise that there were unreasonable regulations in operation in our community, particularly at state level.

The aggregate cost to our economy of red tape is overwhelming; estimates are in the tens of billions. Coupled with the significant overlap and duplication across the different regulatory jurisdictions and more than 1400 regulators supervising it all, there are clearly significant costs to our economy of red tape.

Businesses bear a significant proportion of the burden. The Organisation for Economic Co-operation and Development estimated that the compliance cost of regulation for small- and medium-sized Australian businesses in 1998 was more than $17 billion.

The ultimate effectiveness of moves by Canberra to rein in regulation will be limited if the states and territories fail to follow its lead and adopt their own major red-tape reform programs.

Australia's continuing prosperity and competitiveness depends on reducing unnecessary costs from our economy. Red tape imposes deadweight costs on business and our society. It is the "regulate first, think later" process of regulation-making that needs to be fixed.

That is why the BCA is pleased the government recognises that red tape is a matter of concern for all businesses and that it is the regulation-making system, as well as excessive regulations, that must be fixed. We agree with Treasurer Peter Costello, when he indicated in his announcement that he thought "the most important procedural and substantive changes which will come out of this report are new provisions to prevent unnecessary regulation being made in the first place."