If you ask just about any business large or small what is preventing them from being more competitive, they will tell you it’s regulation, regulation and more regulation.
Of course, good regulation is needed to protect the community and ensure markets operate effectively and in accordance with the law, but bad or unnecessary regulation is a dead weight on the economy, and that is bad for not only business, but for jobs and our future prosperity.
By bad or unnecessary regulation we mean regulation that is redundant, excessive, misdirected, poorly conceived, or which has unintended consequences. All of this ties up time.
What is perhaps less well understood is that “good” regulation could be a comparative advantage, provided governments and regulators have the will to lift performance and a truly global mindset about the challenges Australia faces. There is no reason we can’t have the best regulatory environment in the world.
In the global economy we now live in, businesses every day make decisions about where to invest, where to create jobs and where to locate their businesses; or whether to grow or look for growth opportunities in other countries, based on regulations they face.
Let’s consider some examples. In Western Australia, hardware stores can’t open before 11am on Sundays if they stock both light bulbs and light fittings, due to the Retail Trading Hours Regulation 1988. Light bulbs, yes, light fittings, no, before 11am.
In Adelaide on a Sunday, it is illegal to sell a boat. In South Australia, the Shop Trading Hours Act 1977 prevents shops in Adelaide from opening before 11am on a Sunday. But an exemption is available that allows shops to open early if they sell “asbestos cement sheet and articles”.
Our great innovative company Cochlear was accredited to sell its world-leading medical devices in Europe – a jurisdiction with comparable standards to Australia – but had to go through a separate process to be allowed to sell in Australia.
Despite decades of discussion we still seem unable to find a way for a plumber licensed in Victoria to be entitled to fix a pipe in NSW.
All this matters because the competitive landscape has changed forever, meaning unnecessary or artificial barriers to companies being competitive and adjusting to changes in demand costs jobs.
The Business Council of Australia‘s recent comparative advantages work pointed out regulation affects some sectors more than others, but all too often the burden is falling hardest on sectors that are already competitive but could be global leaders, or in sectors in transition and need every barrier and cost pressure removed.
This is why the federal government’s agenda to reduce red tape by $1 billion a year, its twice-yearly regulation repeal days, its recent industry and competitiveness agenda, and its announcement on the role and performance of regulators are so important.
The suite of reforms announced on the government’s spring repeal day are welcome, but there are standouts.
One is new risk-based audits and the removal of costly building certification requirements for accreditation to the building and construction occupational health and safety scheme. This reduces administration costs and unnecessary barriers to Commonwealth-funded building work, while helping builders with best practice safety approaches.
Another important reform is requiring regulators to report on how well they are meeting expectations at the least cost to the community, including business.
The government also committed to require its regulators not to impose any additional approval process if a product or service is already approved under a trusted international standard.
The commitment in the government’s industry and competitiveness agenda to address restrictive coastal shipping laws that increase costs and make it cheaper to import goods rather than produce them domestically. This is welcome because it can be more expensive to ship a container from Brisbane to Melbourne than from Australia to India.
Of course, there is much more to do, and many of the future reforms will not be easy, such as addressing uncompetitive penalty rates, but the government is right to be taking time to work through these priorities.
The other task for government if it is to leave a lasting legacy of more efficient regulation is to change the culture of regulation in our administrations and regulators.
That means not jumping to regulation to solve every problem, wherever we can design regulation jointly with affected parties so we get it right and do it efficiently, taking a risk-based approach that ensures we don’t over-regulate problems which may be isolated examples. And we have to reduce the reporting and compliance burden associated with the regulation we have.