Handbrakes on our prosperity

With business investment in a funk and productivity going backwards, the last thing the economy needs is a speed limiter on jobs and GDP growth. But that’s exactly what governments and officials around the nation are foisting on us through overzealous regulation. An Institute of Public Affairs-Mercatus Centre analysis shows red tape is strangling the animal spirits in our economy, with the number of federal restrictions — acts of parliament and rules issued by regulators — growing by 9 per cent since the Coalition came to office in 2013. While Canberra’s MPs and senators can’t resist producing legislation, especially in the national security and financial sphere, the real culprits are unelected officials. Since 2005, the number of regulations has tripled.

Tony Abbott’s deregulation agenda saw the number of legislative and regulatory restrictions dip slightly. But under Malcolm Turnbull and Scott Morrison, regulators — including the Australian Securities & Investments Commission and Australian Prudential Regulation Authority — have had a field day. Yet the focus shouldn’t be limited to the national capital. The study found Queensland and Victoria had the most regulatory restrictions, hardly surprising given the heavy-handed tendencies of Labor premiers Annastacia Palaszczuk and Daniel Andrews. The spread of restrictions, however, touches every state, small and large. Tasmania’s per capita count is the highest, while the 20.5 million words of NSW legislation and regulations would take 28 weeks to read.

For a time deregulation was not only a buzzword, it was also a mission. Newly elected governments promise “one in, one out” on regulations, but the rot soon sets in as ministers become captured by bureaucrats and agency heads. As the IPA argues, red tape hurts ordinary Australians by punishing businesses that create jobs and by pushing up the cost of living by making household essentials such as childcare, housing and health insurance more expensive. The think tank is calling on the Morrison government to introduce a “regulatory budget” for each department and to prohibit any new restrictions unless two existing regulations are repealed. The Coalition concedes cutting red tape requires renewed and constant vigilance. But it takes more than good intentions.

This newspaper has consistently argued slashing red tape is one of the best paths to improving the supply side of the economy. As the Productivity Commission outlined in its Shifting the Dial report in 2017, digital technologies can improve the way governments interact with consumers and producers and lower the cost of compliance; they can empower consumers to make markets work better; and, with the right design, regulations can facilitate innovation, through fintech and the internet of things. The digital age puts pressure on regulators to lift their game but also provides the tools to do so. Better regulation can boost investment, which will lead to capital deepening — better tools for workers — and higher rates of productivity growth. The pay-off for deregulation is in higher profits and wages, improved competitiveness and greater national prosperity.