Getting the balance right on deregulation

John H C Colvin welcomes the Abbott government’s new agenda for deregulation, noting that many of its proposals echo those of Company Directors.

2014 will be a busy year in politics and policy, with significant implications for the economy, business and the director community. On the political front, there will be state elections in South Australia, Tasmania and Victoria, a by-election in the former Prime Minister’s seat of Griffith and a possible re-run of the Senate election in Western Australia.

On the policy horizon, there is the new federal government’s Commission of Audit and first Budget, as well as major reviews of competition policy, the financial system, tax system and federal relations.

The government will also be implementing a range of its promised policies. Much of the media attention has focused on the more high-profile ones, such as the abolition of the carbon tax, its replacement with the Direct Action policy, the end of the mining tax and reform of the National Broadband Network. But another very important policy for the business community will be the Abbott government’s new agenda for deregulation, led by parliamentary secretary to the Prime Minister, Josh Frydenberg.

I have had the pleasure of meeting Frydenberg on two occasions since the election and have no doubt about his determination to tackle this difficult issue. It is also heartening that the government’s policy agenda is very consistent with Company Directors’ own approach to the issue, as set out in our pre-election policy paper, Governing for a More Prosperous Australia: Key Issues for Directors in the 2013 Election and our White Paper, Towards better regulation.

The parallels can be seen in a recent speech by Frydenberg setting out the basis of the government’s approach. 
 
He said: “Questions must be asked first before any new regulations are passed. What is their purpose?  Their cost?  Their impact on new entrants?  And their effectiveness in managing risk? Only then, when it is absolutely necessary, with no sensible alternatives available, should we proceed with regulation... The government needs to reform the sheer volume of regulation, work to eliminate extensive duplication and regulatory overlap, and improve the quality of consultation between government and those affected by any new regulations.”

Many of the specific measures proposed by the government directly reflect those put forward by Company Directors. These include a series of reforms that will hold ministers and the bureaucracy to greater account. Cabinet submissions proposing legislative changes with a large regulatory effect will no longer be exempted from the regulatory impact assessment process.

Ministers will establish designated units in their own departments to advise on deregulation priorities. Each minister will also appoint a committee with business representation to advise on where regulation can be cut.

Senior members of the public service will have their remuneration directly linked to their performance in reducing red and green tape and two parliamentary sitting days will be set aside for repealing legislation each year. (The first “repeal day” has been set down for the final parliamentary sitting week in March). This will be overseen by the Prime Minister and his department, which will subsume the deregulation unit and the Office of Best Practice Regulation previously located in the Department of Finance.

Regulators will also be subject to the new approach. The government will instruct the Productivity Commission to prepare a framework for auditing the performance of regulatory agencies, citing Company Directors’ view that “regulators have tended to adopt an unduly risk-averse approach to the administration of regulation and are often overly bureaucratic in their interactions with business”.

Reinvigorating the Council of Australian Governments reform agenda will also be important because, as we have consistently argued, many of the deregulatory challenges require an inter-governmental approach. This deregulation push also needs to be part of a broader cultural shift in the way Australia views the role of business. We need to move away from what I call a “blame culture”, which seeks to punish and restrict business, towards a more entrepreneurial one if we, as a country, want to succeed.

Creating this new entrepreneurial culture will require peeling back the layers of regulation to free up Australian businesses, giving them a chance to grow, and compete internationally.

If we do not make the changes to ensure the private sector thrives, we will condemn ourselves to a decline in living standards and in the tax revenue on which our hospitals, schools and other services ultimately depend. After all, 87 per cent of tax comes directly from the private sector.

Getting the balance right on business regulation is vital for the prosperity of everyone. And, it may be too late if we do not start seriously attacking the problem now.

Creating a more efficient system of regulation will be a central policy issue in 2014 and one on which Company Directors will continue to be very active on your behalf.