Red tape setting back businesses billions and counting
In Australia, bureaucracy has become so concentrated that compliance has become a huge industry in itself.
Businesses hired 52,000 dedicated workers in 2024 just to comply with regulations, according to a report published on Monday by the Australian Institute of Company Directors.
That’s more staff than the entire coal mining industry, Australia’s second-largest export industry, employs.
The paper, written by economic consultancy Mandala Partners, estimates that the dizzying pile of federal bureaucracy over the last decade has cost Australian businesses and the economy $160 billion, or 5.8 per cent of GDP.
This is up from 4.2 percent of GDP in 2013, when the last economy-wide regulatory stocktake was compiled.
The analysis reveals the scope of the challenge facing Treasurer Jim Chalmers as he seeks to increase productivity and reduce unnecessary bureaucracy in the economy.
AICD chief executive Mark Rigotti has warned Australia has become a difficult place to do business and will lose its international competitiveness without change.
The amount of federal regulatory pages has tripled since 2000, and the time boards spend complying with red tape has increased from 23 percent to 55 percent in the past 10 years, the report said.
“This is not about weakening protections or making things easier. It’s about making our regulatory system fit for purpose,” Mr. Rigotti said.
“We know we got the balance wrong when more than half of the board’s time is consumed by compliance and regulatory oversight.”
The problem is not that governments try to regulate risky or destructive activities, but that the cumbersomeness of stacking laws over time is the problem.
In a report published earlier this year, the independent advisory body Productivity Commission It found that poorly designed individual regulations or the “accumulation” of multiple regulations hindered business investment and dynamism.
This has contributed to Australia’s productivity growth, the main determinant of rising living standards in the long term, falling to its lowest level in more than 60 years.
Dr Chalmers said he was determined to break the blockages.
“Whether it’s cutting tariffs, streamlining and strengthening our foreign investment regime, our merger reforms, or our environmental reforms in Parliament this week, we’re doing a lot to develop regulations responsibly and speed up approvals,” he said.
“We already have a big agenda to ease the burden on businesses, cut red tape and build more homes but we are keen to do more where we can.”
The institute called on the comptroller to reduce the regulatory burden by a quarter by 2030 and implement a process to better evaluate the impact of new pieces of regulation on compliance costs.
Other recommendations in the report included increasing the threshold at which companies must submit their audited financial reports to the corporate regulator from $50 million in revenue and $25 million in assets to $100 million in revenue and $50 million in assets.
This alone would eliminate the climate reporting burden for approximately 1,500 companies while saving approximately $1.7 billion in compliance over four years, according to the report.
“We must abandon a set-it-and-forget-it approach that allows regulatory buildup by default,” Mr. Rigotti said.
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