Key issues
2.1
Following the federal election in 2013, the Australian Government
implemented 18 policy measures then comprising the Deregulation Agenda.[1]
However, two years later, in 2015 the Australian Chamber of Commerce and
Industry (ACCI) published its third Red Tape Survey showing that regulatory
burden continued to concern small to large businesses:
The majority of respondents [73 per cent] believe the amount
of red tape has increased over the past 12 months...nearly half of the
respondents [47.2 per cent] reported that the impact of regulation had
prevented them from making changes to grow their business.[2]
2.2
Throughout 2017–2018, the committee conducted a series of interim
inquiries, where it consistently heard that the concerns expressed in the ACCI
survey have not abated. Chapter two discusses some of these concerns within the
context of the Deregulation Agenda policy and process.
The regulatory landscape
2.3
In Australia, there are more than 70 Commonwealth departments and
agencies involved in making and administering regulations.[3]
This is in addition to state, territory and local government regulators, as
well as Ministerial Councils and other national standard-setting bodies.[4]
Stock of regulation
2.4
Regulation takes various forms, from primary and subordinate legislation
to codes, instruments and standards (quasi-regulation). In 2014, a stocktake of
Commonwealth regulation revealed a regulatory footprint of approximately 1800
pieces of primary legislation (two per cent), 12 200 subordinate instruments
(four per cent) and 71 000 pieces of quasi-regulation (84 per cent).[5]
The compliance cost of these 85 000 regulations was estimated at $65 billion
annually (about 4.2 per cent of Gross Domestic Product, GDP).[6]
2.5
The Institute of Public Affairs (IPA) estimated red tape reduces
economic output by $176 billion or ten per cent of GDP:
Red tape is the single biggest barrier to economic
opportunity and prosperity in Australia. Each year red tape reduces economic
output by $176 billion, which is around 10 per cent of GDP. This represents all
of the businesses which are never started, the jobs never created, and the pay
rises which never materialise because of red tape.
Red tape is one of the key causes behind low rates of private
business investment in Australia, which currently sits at just 11.8 per cent of
GDP. This is lower than the rate that prevailed during the economically-hostile
Whitlam years. Low business investment is in turn a key cause of slow wages
growth, which has been stagnant in the private sector in real terms for the
past three years.[7]
2.6
In the interim inquiries, stakeholders commented on the amount of
regulation affecting their industries, with many claiming their industry is
highly or over‑regulated. In the tobacco retail inquiry, for example, the
National Retail Association submitted that there is 'an excessive red tape
burden on retailers in each state'.[8]
2.7
The IPA submitted that, despite the Deregulation Agenda, the scale and
scope of regulation has expanded in recent years, with more than 107 000 pages
of regulation introduced since 2013. The majority of this regulation has been
created through subordinate legislation (85.6 per cent), instigated by 'an
unelected administrative state which is gradually eroding the rule of law'.[9]
2.8
IPA argued that there should be structural mechanisms to constrain the
ability of government to expand regulation—such as a 'one-in, two-out' approach
to regulatory reduction. Its representative, Matthew Lesh, suggested also that
there is a need for simple and clear drafting of regulation.[10]
2.9
Dr Craig Latham, representing the Australian Small Business and Family
Enterprise Ombudsman (ASBFEO), said that reducing the quantum only addresses part
of the problem: 'the churn has its own costs here as well. For small business,
changing—even if you're taking two out and putting one in—itself is a problem'.[11]
2.10
The Council of Small Business Organisations Australia (COSBOA) and its
Chair, Mark McKenzie, argued that the focus should not be on volume but on
having 'good regulation and good regulators'. Mr McKenzie said:
It's about the nature of the policies and the objectives they
have rather than the number. Certainly, from a small business perspective,
we're not going to advocate for small policies. It's about having the right
ones and the right number relative to what we're trying to achieve.[12]
2.11
Both Mr McKenzie and Adam Carr from ACCI added that there is also a
problem with how business is being regulated. Mr Carr said:
It is not so much about regulation per se...it's about the way
we do it...It's the works, the length, the volume and the multiple
jurisdictions that people have to deal with. So there is a sense of, 'Let's get
the building blocks and the process right first and red tape will reduce.' Red
tape is that part of regulation which imposes an unnecessary or needless
burden. It's not that we don't need regulation; we do. It's just we don't want
to waste our time doing it.[13]
2.12
The COSBOA representative agreed that 'the key failure we see is the
implementation' of regulation:
There seems to be thinking inside government that small
business is a little big business, when in actual fact it's not. It doesn't
have a small IT department. It doesn't have a small HR department. It tends to
be one or two people in the family enterprise. They're effectively shouldering
the entire compliance burden. I think there's a failure of government and
regulators to understand that at times.[14]
2.13
COSBOA submitted that all governments, since at least the mid-1980s,
have agreed that regulatory burden on business should be eliminated. However,
extensive efforts in this regard have achieved little:
There have been at least 8 red tape busting task forces
formed and reformed...There have also been any number of committees working within
government departments and between government departments. There has also been
the same number of committees and taskforces and forums at the state and territory
levels. The outcomes of these committees and taskforces have been extraordinary
to say the least. Things did not necessarily get better as a result of all this
work and all these meetings and all those reports. The new red tape and
compliance demands placed on small business over the last 25 years has been
overwhelming.[15]
Types of red tape
2.14
One of the 'red tape busting task forces' referred to by COSBOA was the
2006 Taskforce on Reducing the Regulatory Burden (Taskforce), established to identify
practical options for alleviating the compliance burden on business from
Commonwealth regulation.[16]
As part of its work, the Taskforce identified five common themes of regulatory
burden:
-
excessive coverage, including regulatory creep;
-
overlapping and inconsistent regulatory requirements;
-
regulation that is redundant or not justified by policy intent;
-
excessive reporting or recording burdens; and
-
variations in definitions and reporting requirements.[17]
2.15
In each interim inquiry, submitters and witnesses described multiple
instances of these types of red tape affecting their industry. Perhaps the most
consistent concern was duplication in regulation between and among
federal/state/other regulators. For example, in the private education
inquiry, the National Catholic Education Commission referred to duplication in
financial reporting to federal/state education departments and the charities'
regulator, the Australian Charities and Not-for-profits Commission.[18]
2.16
A related concern was whether the Australian Government sometimes acts
beyond its authority, with state/territory governments having responsibility
for certain areas. For example, in the sale, supply and taxation of alcohol
inquiry, the Australian Hotels Association submitted:
The regulation of licensed premises concerned with the sale
and supply of alcohol are appropriately managed at the State/Territory level.
The capacity or need for the federal government to involve itself in matters of
red tape within state and territory jurisdictions is limited. Further, there
are matters best left to the state and territory governments to administer,
taking into account the particular situations in their jurisdiction.[19]
2.17
Mr Lesh, Research Fellow at the IPA, argued that there is a continuing
centralisation of power that undermines good governance principles, affecting
both design and implementation:
The further you take the regulators in distance...both
physically and symbolically away from those who are feeling the impact of the
regulation, the less knowledge they're going to have. This is the classic
Hayekian knowledge problem, which is that information is dispersed. That's
effectively the reason why markets are so effective: they take advantage of
that dispersed knowledge. But it's also a good justification for decentralised
governance in itself. When the states and the federal governments both try to
do things, it's quite problematic.[20]
Regulation and red tape reduction
2.18
In 2014 and 2015, parliamentary sitting days were set aside for the
repeal of unnecessary or redundant legislation and associated regulations (Autumn/Spring
Repeal Days). In the first year, bills were introduced to repeal over 1,800
statutes and 10 000 legislative instruments; in the second year,
legislation was introduced to repeal a further 1,796 statutes.[21]
2.19
At the beginning of 2016, the Autumn/Spring Repeal Days were replaced by
annual reports that are intended to assess regulatory performance.[22]
The first of these reports—the Annual Regulatory Reform Report,
1 January 2016–30 June 2017—summarised the Deregulation
Agenda's progress to date in reducing regulation and red tape (which progress is
measured in terms of compliance cost savings):
Since September 2013 the Government has now implemented over
1500 decisions estimated to yield around $5.2 billion in net regulatory cost
reductions; this represents almost 90 per cent of the net value of all reported
decisions since 2013.[23]
2.20
Around 190 reported decisions with a total net saving of about $710
million have not been implemented, as the enacting legislation has not been passed
in the Parliament. Among the larger decisions (> $10 million) is the One Stop
Shop initiative that aimed to create a single environmental assessment and
approval process for nationally protected matters.[24]
Measuring regulation and red tape reduction
2.21
ACCI's 2015 Red Tape Survey revealed that a majority of businesses
(53.3 per cent) spent over $10 000 in regulatory compliance costs in 2014
(up 6.4 per cent from 2013). More than half of all businesses (54.9 per cent)
could not pass on any of these actual costs to consumers, which were in
addition to time spent on compliance and lost opportunity costs.[25]
2.22
A key element of the Deregulation Agenda is an annual regulation
compliance cost reduction target of net $1 billion.[26]
Mr Lesh from the IPA acknowledged this objective but questioned whether the red
tape burden should be measured with reference to compliance cost savings:
We have some issues in the way that the red tape burden is
calculated, largely because that's purely related to compliance costs rather
than a broader idea of the opportunity costs of red tape. The compliance cost
of not doing something is very low, of course, but, if you ban something,
the opportunity cost to the economy is quite high, which is why the IPA
estimate of red tape is at $176 billion a year that it costs the economy.[27]
Departments' response
2.23
The Department of Jobs and Small Business (Department) submitted:
Australia is recognised internationally for its regulatory
policy and governance arrangements. The ultimate aim of the Australian
Government's regulatory efforts is to improve economic, social and
environmental outcomes for all Australians.[28]
2.24
A representative argued that the Deregulation Agenda has achieved
considerable success, referring in particular to compliance cost savings to
date ($5.9 billion) but explaining that this is not the only measure of success:
It's certainly not the only measure. There certainly is a
focus on costs, because it's a metric that is easiest able to be measured. But
the underlying philosophy is that regulation should only impose where necessary
and at the lowest cost, and, where there is going to be regulation, that those
who are making the decision to impose or apply it are conscious of the burden
and that the burden is justified.[29]
2.25
An officer from the Department of Prime Minister and Cabinet (PM&C) clarified
that policy proposals are developed in accordance with The Australian
Government Guide to Regulation, which sets out seven guiding questions to
focus policy-makers on the regulatory impact of major decisions. It also
includes 'Ten Principles for Australian Government Policy Makers' to help
regulators answer those questions.[30]
Committee view
2.26
Australia has a complex regulatory landscape, with regulation and red
tape continuing to concern business five years after introduction of the
Deregulation Agenda. A key concern is the sheer volume of regulation, although
the committee acknowledges other factors (such as breadth, length and
complexity). Another concern is the preponderance of five types of red tape
that exist across multiple sectors. The committee notes that duplication is
most commonly raised, indicating perhaps the difficulty of coordination between
regulators and jurisdictions.
2.27
The Deregulation Agenda has achieved a useful reduction in regulation
(as measured by compliance cost savings). However, the committee expects any
current momentum will be lost unless other key policy measures are successfully
implemented (including instillation of a cultural attitude toward deregulation
within regulators). The committee also recognises that there is debate
regarding the appropriate method to quantify deregulation and that some
reported decisions to effect compliance cost savings have not been implemented
(and so cannot yet be claimed as savings).
2.28
The committee considers that it is important to accurately gauge the
stock of Commonwealth regulation, which was last counted in 2014. This will
help to monitor and assess progress, as well as to identify reform priorities,
under the Deregulation Agenda. It will also contribute to engendering a
whole-of-government attitude toward deregulation.
Recommendation 1
2.29
The committee recommends that the Australian Government, through the
responsible agency (currently the Department of Jobs and Small Business), conduct
a whole-of-government stocktake of Commonwealth regulation every three years.
Regulator Performance Framework
2.30
In 2014, the Australian Government established the Regulator Performance
Framework (Framework), a key element of the Deregulation Agenda.[31]
Overall:
The Framework aims to encourage regulators to undertake their
functions with the minimum impact necessary to achieve regulatory objectives
and to effect positive ongoing and lasting cultural change within regulators. This can
include adapting their approach, for example, to reduce burdens on small
business. In turn this will also assist regulators in meeting community
expectations, which will help build stakeholder and public confidence.
The Framework will allow regulators to report objectively on
the outcomes of their efforts to administer regulation fairly, effectively and efficiently.
It will also be a useful tool for regulators to identify opportunities for
improvement and better target their resources for greater impact. The Framework
will assist in highlighting where improvement of regulatory frameworks could
reduce compliance costs.[32]
Key Performance Indicators
2.31
The Framework seeks to achieve its objectives by establishing a common
set of six outcomes-based key performance indicators (KPIs). The KPIs cover
matters such as communication, risk-based and proportionate approaches,
transparency, regulatory burden reduction, and continuous improvement.[33]
Each is underpinned by a description of better practice principles, measures of
good regulatory performance, and examples of output/activity-based evidence.[34]
2.32
In the interim inquiries, stakeholders expressed numerous concerns about
Commonwealth regulators' performance under the Framework specifically relating to
the KPIs more broadly. For example, in the pharmacy rules inquiry, the Grattan
Institute submitted that the Department of Health needs to develop clear
standards and processes for working with industry and lobby groups, as pharmacy
regulation has been intractable despite several independent recommendations for
reform.[35]
2.33
For the policy and process inquiry, COSBOA's representative, Mr McKenzie,
said 'what we have now is a very patchy adherence to the Regulator Performance
Framework'. He emphasised the importance of good leadership and culture in
creating positive relationships with stakeholders.[36]
2.34
Dr Latham from ASBFEO suggested that performance under the Framework would
be much improved if all staff within a regulatory agency were responsible for
the Deregulation Agenda (not just within regulatory reform units or portfolio
deregulation units):
The most effective way of doing it would be to make it
everyone's job, not to make it someone's job. The [Australian Taxation
Office] has done some great things around creating a small business area, and
they are very attuned to small business. But the issue that we often see—and
they are very good at fixing stuff—is that we have to have the problem and give
it to them to fix it, because the areas doing the debt recovery or whatever it
is haven't got small business necessarily in mind. The idea here is how to
integrate that small-regulation-type deregulation idea into everyone's job.[37]
Stakeholder consultation and
engagement
2.35
The Victorian Chamber of Commerce and Industry highlighted the role of
the Red Tape Commissioner (Victoria) in facilitating consultation with business
on red tape reform priorities.[38]
ASBFEO representative Dr Latham acknowledged that such a position would be
useful at the federal level, but argued that there is a much deeper problem
with stakeholder consultation and engagement:
The solution is much more holistic. It's the capability and
the embedding of consultation and collaboration into government itself, for
government to seek to understand our constituency, small business, to get a
proper understanding of it, but not to sit in an office imagining what a small
business looks like.[39]
2.36
Mr McKenzie agreed that consultations are affected by 'a distance that
has been created by the bureaucracy that is in place'. He said that
stakeholders are typically given 'a preferred position and then three very
obscure alternatives that are designed to make the preferred position look
really good'. Mr McKenzie suggested that greater accountability, specifically
in the process of regulatory impact analysis, would help to develop better
regulation.[40]
Creating a deregulation and red
tape reduction culture
2.37
Witnesses considered the question of how to create a deregulation and
red tape reduction culture.[41]
COSBOA expressed a view that the Framework should be 'compulsory for agencies
at a whole-of-government level' and more robust to combat inconsistent
application. Its representative, Mr McKenzie, suggested that potential
disincentives should be actively managed, for example:
There is a potential loss of budget allocation as you start
to close down regulations. There's maybe even a point where you're actually
quarantining that money in terms of forward estimates for a period of two or
three years where there is an opportunity for that money to be redeployed in
value‑producing elements, maybe in a policy or strategic area, so that
the agency or department is actually protected in the near term and there is no
disincentive to pull back.[42]
2.38
Self Employed Australia's Mr Phillips offered some further suggestions,
one of which would be for the Parliament to signal the intention with clear and
simple primary legislation:
At the federal level there's a high art form of writing
legislation that requires a QC's opinion to interpret. So, if parliament were
to have its mind towards requiring legislative drafts people to write plain
English legislation that gives clear instructions to the Public Service and
that the general public has a fairly good chance of understanding as well, that
would create checks and balances.[43]
Department's response
2.39
An officer from the Department explained:
The focus on the [Framework], of how the regulators actually
apply the regulation, is a key element, because...it's often the way in which the
regulation is applied, and regulators being conscious of that...the other key
part of it is about trying to ensure decision-makers and others don't
reflexively reach for regulation as the answer to every problem but think about
the regulatory burden and where it can be removed.[44]
2.40
Regulators' performance is assessed through annual externally validated self‑assessments.[45]
The Department submitted that an internal review of these reports found high
compliance for 2016–2017:
Generally, regulators acknowledged the benefits of the [Framework],
including greater feedback from stakeholders and the flexibility to adjust how
they reported to fit their needs. Over 90% of all Commonwealth regulators
covered by the [Framework] had completed and published their self-assessment
reports for the 2015–16 reporting cycle.[46]
2.41
In relation to creating culture, a departmental representative stated that
ministers are attentive to the Deregulation Agenda as it is an agenda of the
Australian Government. Further, the officer considered that the regulatory
reform units, or deregulation units, within each portfolio are effective,
including to instil a deregulatory attitude within portfolio areas. However:
Clearly there is more to be done. It's an ongoing process, in
part because it involves changing the culture as much as applying rules.[47]
Committee view
2.42
The Framework is crucial to reducing red tape and regulatory compliance
costs, as it addresses the ways in which regulation is to be administered. As
such, there is potential for significant impact on individuals, community
organisations and businesses. According to stakeholders, Commonwealth regulators'
performance against the Framework's KPIs is not consistent. The committee
accepts that this is creating more than minimal impact, jeopardising positive
cultural change within regulators, and diminishing stakeholder confidence.
2.43
Stakeholder consultation and engagement was a focal point of discussion
in the policy and process inquiry, with regulators particularly accused of
having no real concept or understanding of the small business sector. This
concern echoed what the committee has heard from other sectors, leading the
committee to believe that, in some respects, there is a fundamental disconnect
between regulators and regulated entities, and between the purpose of
regulation and its actual effects.
2.44
Regrettably, Commonwealth regulators and stakeholders offered few practical
suggestions for creating culture change. The committee is pleased to note the
Department's acknowledgement of the ongoing challenge, however.
2.45
In relation to performance reporting, the Australian Government's consolidated
annual report is relatively up‑to‑date, notwithstanding machinery
of government changes at the end of 2017. On the other hand, the publication of
self‑assessment reports by Commonwealth regulators has been tardy, if not
non‑existent. No explanation has been provided for these omissions.
2.46
The committee considers that each department and/or agency should
be required to publish its self-assessment reports under the Deregulation
Agenda as part of its annual report. This would increase transparency and
accountability under the Deregulation Agenda, consistent with the KPIs, as well
as providing opportunities to monitor progress and identify reform priorities.
2.47
The committee is also concerned that the KPIs may not be sufficiently
clear or robust to avoid bureaucratic "interpretation" to negate
their purpose. The committee would like to see each regulator obliged to focus
on key questions, such as: What ill is the regulation intended to avoid? How
well is it doing this? What are the other consequences of the regulation? Is
there another way of achieving the intended outcome with fewer unintended
consequences?
Recommendation 2
2.48
The committee recommends that the Australian Government amend the Public
Governance, Performance and Accountability Act 2013 Cth) to require all
Commonwealth bodies that administer, monitor or enforce regulation to publish the
self-assessment reports provided to the Department of Jobs and Small Business
as part of the Deregulation Agenda.
Recommendation 3
2.49
The committee recommends that the Australian Government revise policy
measures implemented under the Deregulation Agenda to focus more on the reasons
and purpose of Commonwealth regulation and to ensure that any such regulation
is appropriate and proportionate.
Regulatory Impact Analysis
2.50
Regulatory Impact Analysis (RIA) is a systemic approach to critically
assessing the positive and negative effects of proposed and existing
regulations and non-regulatory alternatives. The Organisation for Economic
Co-operation and Development notes that RIA is an important element of an
evidence-based approach to policy making.[48]
2.51
The RIA process undertaken during policy development is summarised in a
Regulation Impact Statement (RIS), which is used to inform decision-makers. A
RIS aims to quantify all regulatory costs and offsetting regulatory savings for
policy proposals using a Regulatory Burden Measurement Framework.[49]
Regulatory compliance costs
2.52
Stakeholders in the interim inquiries have raised concerns about
regulatory compliance costs (actual and other) and their effect on individuals,
businesses and industry. In the environmental assessment and approvals inquiry,
for example, the Minerals Council of Australia submitted that regulatory
delays on major greenfields mining projects can cost up to $46 million each
month, increasing business risk and making Australia less attractive for
investment.[50]
2.53
Domestically, there does not appear to be any independent study of the
productivity and economic impacts of the Deregulation Agenda, notwithstanding a
2015 recommendation from the Australian National Audit Office.[51]
2.54
Stakeholders contended however that these impacts exist and are not
properly quantified by regulators, partially due to consultation issues and the
RIS process. ASBFEO representative Dr Latham suggested that the process might be
improved by implementing an independent disclosure statement, as occurs in New
Zealand:
The RIS is developed by the policy people. They're the ones
that are closely involved in it. But, at the end of it, it gets handed across
to a person who is generally more independent of that process. They have to do
a disclosure statement of one page or two pages or whatever that points out the
problems with the regulation and the development of it. So they will say, 'This
bit of research wasn't done,' or 'We consulted, and they said this but we are
not taking that advice.'[52]
PM&C's response
2.55
PM&C's representative responded that Australia has a strong internal
governance framework around regulation, and the Office of Best Practice
Regulation (OBPR) assists regulators throughout the RIS process to 'to try and
make [RISs] as strong as they can be'. Further:
Where our assessment is that it doesn't meet the
requirements, whether it's in respect to consultation or something else, we
give some pretty frank advice to the cabinet and some pretty independent advice
on the quality of the [RIS], and we will call out, and are prepared to call
out, those that do not meet those standards of evidence.[53]
2.56
Officers noted that, from 2014–2018, Council of Australian Governments
(COAG) Councils and national standards-setting bodies have prepared five RISs
that did not support regulatory agreements/decisions. Commonwealth regulators
have also presented non-compliant RISs:
There have been a number of occasions where the OBPR has
assessed that the RIS has not been compliant with the RIS requirements, and
often that's on the basis of not establishing a problem that is best addressed
through further government regulation or national regulation of an issue.[54]
2.57
In the same four-year period, 35 RISs were assessed by OBPR as not being
best practice (for example, due to the need for greater definition of the
policy problem being addressed or a higher level of consultation or
representation of stakeholder views on the options and likely impacts).[55]
An officer said:
If we find that something doesn't meet best practice, we have
a process where we have a post-implementation review. Within five years of
implementing a major regulatory change which has substantial or widespread
impact on the economy, or within two years where an adequate RIS was required
but not prepared, we will require an agency to do a post‑implementation
review.[56]
2.58
However:
At the end of the day, the ministerial council, or whatever
decision-maker it is, still has the ability to make a decision regardless of
what is in a RIS and regardless of whether an adequate RIS has been prepared by
the secretariat or the department that's advising them.[57]
Committee view
2.59
RIA did not receive as much attention from stakeholders as those
processes likely deserve. This is somewhat perverse given the numerous concerns
about regulatory compliance costs and the Deregulation Agenda's stated
objectives of boosting productivity and the Australian economy.
2.60
Time and time again, stakeholders highlighted regulatory compliance costs
as an ongoing issue, suggesting the matter has not yet been adequately
addressed. The committee acknowledges that there could be several reasons
for this lack of resolution—for example, insufficient consideration by regulators,
difficulty in quantifying actual and other costs, et cetera. Significantly,
there is no comprehensive and independent evaluation of productivity and
economic impacts of the Deregulation Agenda, a situation that ought to be
expeditiously remedied.
Recommendation 4
2.61
The committee recommends that the Australian Government initiate a
five-year review by the Productivity Commission of the productivity and
economic impacts of the Deregulation Agenda.
2.62
In addition, and to complement Recommendation 4, the committee considers
that Commonwealth regulators would benefit from having regular stakeholder feedback
on the business impacts of the Deregulation Agenda (similar to the ACCI's Red
Tape Survey). This feedback would enable regulators to monitor those impacts,
formulate better regulation, and most importantly, build better relationships
with regulated entities.
Recommendation 5
2.63
The committee recommends that the Australian Government, in collaboration
with the Australian Chamber of Commerce and Industry and the Council of Small
Business Organisations Australia, develop a red tape survey to be conducted
every two years, to ascertain stakeholders' views on the practical operation
and outcomes of the Deregulation Agenda.
Reasons for regulation
2.64
Stakeholders maintained throughout the interim inquiries that there is a
role for government regulation—for example, to prevent harm (the
occupational licensing inquiry), to ensure quality (the childcare
inquiry), et cetera. However, they distinguished between good and bad
regulation, as did witnesses to the policy and process inquiry.
Philosophical bases for regulation
2.65
The IPA's representative affirmed its support for minimal regulation
(based on John Stuart Mill's harm principle), which it defined as only that
which is necessary to achieve a public policy goal. Kurt Wallace, Research
Fellow, argued that this threshold is well exceeded in Australia:
Red tape should be defined as regulation that goes over and
beyond what is necessary to achieve a public policy goal. In Australia we have
a huge regime of licensing laws and regulation in other areas that go well
beyond protecting basic 'do no harm to others'.[58]
2.66
Mr McKenzie from COSBOA argued that the prevention of harm is only one objective
of regulation: regulation also aims to protect the vulnerable (John Rawls' theory
of natural justice) and to maximise outcomes for the greatest good (Jeremy
Bentham's theory of utilitarianism).[59]
2.67
While Mr Lesh agreed that utilitarianism is 'a good backing principle',
he cautioned:
The issue with the Benthamite logic is that it's often used
as a public interest justification for, really, any government action. In
practice, when you start saying, 'Well, we need to maximise the greatest good,'
basically you can try to frame your regulation in terms of the greatest good,
when in fact it's serving a narrower interest...Quite often what happens in
regulatory debates is that every individual piece of regulation is put in very
logically and rationally and—not to impugn motives—often with the best of
intentions but, in fact, the outcomes and the results of the regulation are not
in the greatest good and do not actually benefit the people they are supposed
to benefit.[60]
2.68
ACCI identified a fourth rationale for regulation: to establish trust
and integrity in a market. Its Chief Economist and Director of Economics and
Industry Policy, Adam Carr, said: 'at a simple level, if you're a consumer and
you're buying honey, shoes or whatever that you get what you pay for and you
can be sure of that'.[61]
2.69
Witnesses considered whether consumer protection laws (based on Mill)
sufficiently protect consumers, so as to render regulation unnecessary. ASBFEO
and COSBOA representatives concluded that this is not the case because of access
to justice issues. Mr McKenzie explained:
When you actually look at the various actors in an economic
market or in a commercial situation, they have varying levels of access to
justice...if we look at the misuse of market power, which has been an element of
Australian Consumer Law that has existed for more than 20 years...there was not a
single prosecution that was actually brought under that law.[62]
2.70
Alternatively, Mr Wallace suggested that the consumer protection laws
themselves are unnecessary, as markets have built-in mechanisms for guarding
against abuses: 'if a business is not living up to community expectations,
they're going to face the discipline of the market'.[63]
2.71
IPA colleague Mr Lesh contended that business often supports regulation,
as it acts as a barrier to reduce competition in the market.[64]
COSBOA denied that small business is looking for protection from big business but
is instead seeking 'for perversities in the existing economic ecosystem to
be addressed'. Mr McKenzie said:
If we look at the economic ecosystem that we're working in
now, it's a sub‑element of a global system. We're living in an economy
that actually suffers from a lack of scale; so, as a result, there's a need to
address some of the perversities that operate in the ecosystem. So regulation,
from our perspective, actually is a very powerful way of government being able
to address, if you like, limitations in the operation of the market so that the
market can operate with true and fair competition but also ensure that it meets
the societal aspirations of our community in terms of economic, environmental
and social fabric.[65]
2.72
Mr Phillips from Self Employed Australia appeared to agree:
A properly functioning free market is in fact a regulated
market and it's a checks-and-balances situation...the task of government in the
regulation area with a market economy is to allow everyone the capacity to
aspire to become a monopolist but always frustrate the achievement of that. To
me, that's the balancing act that you're looking to achieve in the regulation
sphere.[66]
Committee view
2.73
The committee acknowledges that there are philosophical justifications
for regulation. However, as highlighted overwhelmingly by stakeholders, the
level and type of regulation must be targeted and appropriate otherwise, it
runs the risk of becoming bad regulation or red tape. The committee recognises
that this can be a delicate balancing exercise that may produce adverse and unintended
outcomes, and that a 'feedback loop' prompting regular review is needed to
avert this as much as possible.
Findings and conclusions of the interim inquiries
2.74
As noted in chapter one, the committee has conducted eight interim
inquiries into the effect of red tape in specific sectors. The interim
reports are available at the committee's website, however the committee's findings
are outlined below and its recommendations are presented in Appendix 3.
Effect of red tape on the sale,
supply and taxation of alcohol
2.75
The committee found that red tape is affecting businesses that sell
and/or supply alcohol, with consequent impacts on job creation, business growth
and investment. The committee heard in particular that taxation reform is long
overdue. Based on its findings, the committee made three recommendations to
which the Australian Government has not responded.
Effect of red tape on tobacco
retail
2.76
In this inquiry, the committee received substantial evidence of high
levels of regulation adversely affecting businesses that legally retail tobacco
products. The committee was concerned to ensure that regulation is
evidence-based, including in relation to alternative nicotine delivery systems.
The committee made three recommendations to which the Australian Government has
not responded.
Effect of red tape on environmental
assessment and approvals
2.77
The committee heard that environmental assessment and approvals are over‑regulated
at all levels of government, with adverse small and large-scale economic
consequences. The committee considered that there are opportunities to
streamline regulatory functions and to eliminate red tape. The committee
made 15 recommendations and received a response from the Australian Government
(response tabled 13 July 2018).
Effect of red tape on health
services
2.78
The committee found that red tape in health services is affecting the
operation of healthcare businesses and the provision of services to healthcare
consumers. The committee considered that there are several areas in which
reform would benefit consumers but noted that healthcare reform is slow to
arrive. The committee presented seven recommendations for this inquiry to which
the Australian Government has responded.
Effect of red tape on pharmacy
rules
2.79
In its fifth interim inquiry, the committee heard that red tape continues
to unnecessarily and adversely affect the operation of community pharmacies, to
the detriment of consumers and contrary to the National Medicines Policy. The committee
questioned the rationale for certain regulation—pharmacy location and ownership
rules in particular—which it considered anti-competitive and not consumer
oriented. The committee made six recommendations but has not received a response
from the Australian Government.
Effect of red tape on child care
2.80
For this inquiry, the committee found a high level of in principle
support for regulation in the childcare sector, but not necessarily for the
volume and breadth of regulation. The committee agreed that wherever possible
red tape should be identified and eliminated, especially as the recently
introduced Child Care Subsidy scheme matures. The Australian Government has
responded to these recommendations (response tabled 15 November 2018).
Effect of red tape on occupational
licensing
2.81
The committee questioned the rationale for occupational licensing, which
it considered is a barrier to market entry. Acknowledging that this is largely
a matter for state and territory governments, the committee made four
recommendations that it considered would help progress licensing reform
throughout Australia. The Australian Government has responded to the
committee's seven recommendations (response tabled 15 November 2018).
Effect of red tape on private
education
2.82
For its penultimate inquiry, the committee found that there are high
levels of poor regulation and red tape affecting the private education sector. The
committee expressed concern at these impacts on providers, students, industry
and the economy, and noted that little progress appears to have been made in
relation to deregulation and red tape reduction. The committee supported the
need to better quantify regulatory compliance costs and improve regulators'
performance. The Australian Government has not yet had the opportunity to
consider and respond to these recommendations.
Committee view
2.83
The committee notes that, over a two-year period, it has conducted
several interim inquiries and made multiple recommendations aimed at improving
Commonwealth and other regulation across a range of sectors. While the
Australian Government is expected to respond to reports in a timely manner (within
three months of tabling), the government has for the most part chosen not to do
so. The committee considers this response disappointing, contrary to the
development of better regulation and indicative of a waning lack of interest in
deregulation.
Concluding comments
2.84
The Australian Government has shown a commitment to deregulation and red
tape reduction. Its Deregulation Agenda, built upon previous like-minded
efforts, has achieved certain successes, including internal governance
frameworks. However, the business sector unequivocally argues that the
Deregulation Agenda is yet to deliver the substantive outcomes it set out to
achieve. The inescapable conclusion is that the key policy measures and/or
their implementation require further, more detailed consideration. Based on
information presented, the latter would appear to be the case. If this can
be achieved, the Deregulation Agenda might yet deliver ongoing and permanent
deregulation, as well as better regulation.
David Leyonhjelm
Chair
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