Regulation Blow-Out Risks Economic Growth and Prosperity

The amount and complexity of new regulation imposed on business and the general community far outstripped the benefits and would damage the economy if left unchecked, according to a new report released by the Business Council of Australia today.

Releasing its Business Regulation Action Plan, the BCA has found that the level of new laws and regulation is now growing at 10 per cent a year – three times as fast as Australia’s rate of economic growth.

The action plan quantifies the amount and cost of regulation on large and small business and outlines solutions to curtail the tide of government red tape. It has found the problem of escalating regulation is occurring Australia-wide.

This regulatory blow-out is also a major drain on public as well as business resources, with the costs to governments of administering their own rules and regulations running into billions of dollars a year.

For example:

  • The Commonwealth and State Parliaments added 33,000 pages in new laws, rules and regulations in 2003.
  • Two thirds of all Acts passed by the Commonwealth last year affected business, large and small.
  • The NSW Parliament produces on average 300 pages of new laws, rules, regulations and by-laws each week it sits.
  • Queensland added 8,700 pages of new laws and rules in 2003 alone.
  • In Victoria, there are 69 State business regulators controlling 26,000 pages of regulation.
  • On average, the Commonwealth Parliament now passes 350 pages of new laws every week it sits. (Half of all legislation passed by the Commonwealth Parliament since Federation has been passed in just the last 14 years).
  • The Commonwealth Government alone spends around $5 billion a year of taxpayer funds on administering business regulation.

BCA President, Mr Hugh Morgan, said the report found that governments frequently regulate in knee-jerk reaction to political problems, without first testing existing laws or asking if new regulation is actually required.

“It’s a case of ‘regulate first, ask questions later’, Mr Morgan said.

The report found that the sheer volume of regulation has overwhelmed the scrutiny and accountability mechanisms that are supposed to ensure quality regulation.

As a result, much regulation is unnecessary, poorly designed and administered, often without factoring in if the costs outweigh the benefits.

Mr Morgan said in a number of cases, the complexity and amount of regulation was so confusing or contradictory that Australia’s courts, including the High Court, found it difficult to understand or adjudicate.

Mr Richard Humphry, Chairman of the BCA’s Business Reform Task Force, which developed the report, said only Australia’s booming economy was shielding business and the community from the true costs of rising regulation.

“Regulation is a cost at three levels – it costs businesses when they divert resources and bear the costs of compliance; it costs consumers when business passes on these costs in whole or in part; and it costs governments billions of dollars a year to administer it,” Mr Humphry said.

“A strong economy can only shield Australia from the worst impacts of regulation for a limited time – it will directly affect growth by tying up too many resources in ultimately unproductive activities.”

Mr Morgan said business played a central role in Australia’s economic success story, in terms of jobs, money invested and wealth generated for Australian shareholders.

As the recent federal Budget showed, a large share of the tax cuts and new social services will be funded through the record $48 billion of corporate tax being paid to Canberra a year.

”Business must have the right conditions to be able to keep on growing and delivering these benefits – regulation growth at three times the rate of economic growth is a recipe for a slow down in the Australian economy.”

To address the regulation problem, the BCA’s report recommends that governments at the federal, state and local levels:

  • Fix the systems that currently create regulation, making sure that all new regulation fully takes account of costs to business, avoids overlap and duplication with existing red tape and is subject to regular review.
  • Clean up the stock of existing regulation to improve or eliminate unnecessary, duplicate and outdated regulation.
  • Tackle the overall problem of overlap and lack of coordination between the Commonwealth and states, and between states themselves.

Mr Morgan said Australia’s overseas competitors had already embarked on major efforts to improve their business regulation.

“Australia cannot afford to be left behind.

“Our governments know this is a problem – now is the time for them to act.

“Regulation should serve business, the community and the broader economy – and not the other way around,” Mr Morgan said.

Business Regulation Action Plan for Future Prosperity