Address by The Hon Lindsay Tanner MP
Minister for Finance and Deregulation
TUESDAY 26 FEBRUARY 2008
The Rudd Labor Government has inherited an economy in which underlying inflation is running at 3.6%. This is the highest inflation rate Australia has experienced for 16 years.
Australian businesses and home-buyers have had 11 interest rate increases in a row.
The Reserve Bank of Australia warned the previous government on 20 occasions about capacity constraints in the economy caused by infrastructure and skills deficits and the risks these posed to inflation. Yet little was done by the Liberals to address these issues.
Commonwealth spending has been accelerating at an unsustainable rate. Fiscal policy has been contributing to inflationary pressures when it should have been constraining them.
This is the Liberals’ economic legacy.
John Howard and his government were only ever focused on the short term. They spent money only to stay in office. They lacked the ideas and discipline to do the things required to set Australia up for the next ten to twenty years.
The Rudd Labor Government has a different approach. Our focus is on the long term task of reducing inflationary pressures and improving Australia’s productive capacity.
Productivity is at the heart of the Rudd Government’s economic agenda for Australia. It is at the heart of our education revolution and our commitment to remove infrastructure bottlenecks. It is at the heart of our determination to restore spending discipline, so we can refocus the Budget on the things that will count for Australia’s future.
Improving productivity is also at the heart of what I want to talk to you about this evening – Labor’s deregulation agenda.
Like a smouldering fire the Liberals let the deregulation agenda in this country lie dormant for most of their eleven years in office.
I intend to re-ignite it.
Relieving businesses and consumers of the burden of inappropriate, ineffective or unnecessary regulation will build Australia’s productive capacity and create a stronger economy.
The Rudd Government is putting deregulation at the heart of our economic agenda for the future.
I am delighted to be addressing you tonight as Australia’s first Commonwealth Minister for Deregulation.
As Kevin Rudd promised before the election we now have a Cabinet Minister with specific responsibility for deregulation.
This really matters. You won’t see much deregulation when no-one’s responsible for delivering it.
You need a Finance Minister as guardian of fiscal discipline, and a Deregulation Minister as guardian of regulatory efficiency. The two roles fit naturally together, and I am very pleased to have both of them.
We have already started to review and reform existing regulation, adopting practical measures to relieve the regulatory burden.
Procedures will be strengthened to ensure new regulation is enacted only where absolutely necessary and at minimum cost to consumers and business.
Most importantly, I intend to introduce a culture of continuous improvement in regulatory activity.
A culture in which government is always looking for opportunities to streamline regulatory processes.
To form more productive relationships with citizens, organisations and businesses affected by regulation. To actively seek out and respond to ideas for improvement.
Focus on deregulation
Well designed and targeted regulation is essential to fostering competitive businesses and protecting the community.
Copyright and patent laws facilitate innovation by allowing people who create and invest in research to reap the benefits of their work for a period before the new knowledge is made available to all.
Limited liability and legal incorporation are essential to risk-taking economic activity.
Regulations such as these enhance productivity.
Some regulation is necessary to minimise the anti-competitive abuse of monopoly power. A very intrusive regulatory regime may impose serious burdens on a dominant supplier of essential services, but without it, businesses and consumers would face higher prices, poorer services and less innovation.
Other regulation is designed to protect producer interests. Businesses fortunate enough to be inside the regulatory tent don’t complain about the regulatory burden, because it helps keep prospective competitors at bay. Other businesses and consumers pay the price.
My target is regulation which is outdated, excessively burdensome on business or unfair to consumers.
Examples are not difficult to find. The 2006 Taskforce on Reducing Regulatory Burdens on Business, led by Productivity Commission head Gary Banks identified many.
One of my favourites was that governing product labels prescribed by the Australian Pesticides and Veterinary Medicines Authority.
This regulation requires a business to lodge a special application to make any change to the standard product label, even if the only thing that’s changing is the shade of the colour on the label.
The cost of regulation is notoriously difficult to estimate. Spread across a large number of businesses it often goes unnoticed, even though the aggregate burden may be substantial.
The Productivity Commission’s best estimate is that the total cost of compliance associated with all Federal, state, territory and local government regulations could be at least as high as four per cent of GDP per year. That is more than $40 billion.
As well as imposing specific compliance costs, regulation can also have a choking effect on entrepreneurship, risk-taking and innovation.
These costs ultimately affect all of us through higher prices and restricted choice of goods and services.
Deregulation will improve the capacity of Australian businesses to compete internationally. Not by engaging in a race to the bottom, but by catching up to other OECD countries that have already put in place advanced regulatory reform programs to assist business.
Charities and other non-profit organisations also face costs in complying with regulations, reducing resources available for the provision of services to the community.
None of this is new. Political rhetoric about this problem has been in abundant supply.
What is new is that we recognise the need for deregulation to be an ongoing feature of our government if the burden of red-tape is going to be effectively tackled.
Achieving genuine deregulation requires continuous attention, not spasmodic effort.
Kevin Rudd has given me ministerial responsibility for the Government’s deregulation reform program. The Banks Review recommended giving a Cabinet Minister this role, but the former government didn’t respond.
A Minister Assisting on Deregulation, Dr Craig Emerson, has also been appointed.
Reforming existing regulation
Since the Government took office Dr Emerson and I have been getting to work on reforming existing regulation.
We are working with states and territories through the Council of Australian Governments (COAG) to address areas of regulatory duplication or inconsistency between different levels of government.
Our Business Regulation and Competition Working Group has been meeting to progress an accelerated program of reform which will be presented to COAG in late March.
These measures will be targeted at reducing the cost of regulation to business.
For example, the Standard Business Reporting initiative will allow businesses to submit BAS statements, state tax returns, ASIC documents and ABS survey responses through a simpler, faster and easier process using their own record keeping software.
Streamlined environmental assessment processes will stop the time wasting process of two groups of environmental assessors looking at the same information and holding up approval processes.
Nationally consistent occupational health and safety laws will allow multi-state employers to roll out the same training and safety programs across all work sites.
The recommendations of the Banks Review will be revisited. The Banks Review made over 170 recommendations but many of these have not been implemented. We want to turn these recommendations into real outcomes for business.
The Productivity Commission will also conduct regular reviews of the regulatory burden in individual sectors of the economy.
The Government’s response to the Commission’s 2007 report into the regulatory burden in the primary sector will be delivered as soon as possible.
Agriculture Minister Tony Burke has already announced the deregulation of the single desk arrangements for wheat exports.
This reform has been politically tough but it is the right policy for Australia. Growers will benefit from competition between accredited exporters, putting downward pressure on export supply chain costs.
Accreditation standards will ensure that the reputation of Australian wheat exporters, tarnished by the Wheat for Weapons scandal, is rebuilt and protected.
Transport Minister Anthony Albanese has concluded a bilateral open skies agreement with the United States, which will benefit Australian consumers and businesses.
Both these decisions proved too difficult for the Liberals.
A systematic process to identify and reform regulations across other areas of government has commenced. Over the coming months I will be working in partnership with Commonwealth portfolio ministers to identify and address areas where the regulatory burden on business can be eased.
I will initiate proposals for regulatory reform, and conduct joint reform projects with individual Ministers.
The first instalment of this is the comprehensive reform of the Financial Services Reform Act disclosure regime which Kevin Rudd promised before the election.
We have all heard the stories about 50 and 80 page product disclosure statements. The Business Council of Australia even cited an example in their submission to the Banks Review of 227 pages of documentation being given to a customer wishing to open a simple cheque account with overdraft limit and home loan.
This benefits neither the business nor the customer. It increases costs which the customer ultimately bears.
Minister for Superannuation and Corporate Law Nick Sherry and I recently announced the formation of the Financial Services Reform Working Group to solve this problem.
There is work to be done in our own back yard as well.
Reporting and regulatory requirements are essential to the proper functioning of government, but unnecessary red tape in the bureaucracy is a waste of public money.
A review of internal red tape conducted by the Department of Finance and Deregulation has identified a number of areas where bureaucratic processes should be improved.
Reporting arrangements for foreign exchange transactions have previously been streamlined and the electronic AusTender system was introduced to improve government procurement reporting, but there is more work to do on this front.
These reforms are targeted at reducing and reforming existing regulation but this is only half the job. We also want to ensure that there is no net increase in the regulatory burden arising from new Commonwealth regulation.
Reducing the burden of new regulation
Prior to the election we committed to a one-in one-out principle for new regulation. When Ministers bring forward new regulatory proposals, they will be required to also identify other areas where regulation can be modified or removed to reduce compliance costs for business.
This form of regulatory budgeting will address the cumulative burden of regulation.
A common starting date for regulations would also give greater predictability and certainty to business. We are currently analysing the pattern of starting dates across all areas of legislation. There are some obvious exceptions where urgency is required, but significant improvements can be made.
The Office of Best Practice Regulation (OBPR) has moved into the Department of Finance and Deregulation, reflecting its central role in improving the quality of regulation.
The OBPR will continue to administer the best practice regulation principles and be a regulation watch-dog on government departments, agencies and Ministers.
Regulatory proposals will not come to Cabinet unless the OPBR agrees that adequate regulatory impact analysis has been performed.
In all but exceptional circumstances a Regulatory Impact Statement and the OBPR assessment of its adequacy will be made public before regulations come into effect.
Where a regulatory proposal has been exempted from the RIS process, a post-implementation review of its effects will be conducted and the OBPR will publicly release its assessment of the review.
I will shortly be making a statement to the Parliament confirming our commitment to the independence of the Office of Best Practice Regulation.
Administrative arrangements have already been put in place to ensure Ministers cannot seek to influence OPBR decisions on best practice regulation requirements.
The OPBR will, of course, continue to report annually on the level of compliance with the RIS process across all government agencies.
A culture of continuous improvement
All of this represents a significant reform program for the Government.
But the biggest challenge is to establish an entrenched culture of continuous regulatory improvement and reform.
This is not just about what we regulate, but also how we deal with business and the community in administering regulation.
For a decade now I have been arguing that globalisation and technological change have altered the role of government. The old model of command and control is giving way to a new model where government acts more as a facilitator.
Rather than simply mandating rules an effective government must act as an intermediary between different interests in the community.
Time and again we hear from business that government must keep talking to business about how regulation affects them.
This is something that I am deeply committed to doing.
Consultation papers on the new national employment standards, the design and regulation of the first home saver accounts, implementation of a carbon emissions reporting scheme, and proposed amendments to the export cargo legislative framework have already been released.
The Assistant Treasurer has established a Tax Design Review Panel to examine how to reduce delays and improve the quality of tax law changes.
In the coming months I will convene an informal group of senior business leaders who will help alert the government to emerging issues and opportunities for further deregulation and provide feedback on reform implementation.
In addition to this, Dr Emerson and I are also finalising details for a Small Business Advisory Committee which will be consulted on regulatory proposals affecting small business. Its primary role will be to contribute to the RIS process and ensure small businesses are properly consulted.
A key to our success in advancing this deregulation agenda will be our capacity to be open with the community and facilitate compliance rather than just waiting to punish breaches.
Even small changes to practices can make a big difference. Regulators should work with industry to identify improvements to regulatory practices.
I want to encourage a culture of continuous regulatory improvement in the same way manufacturers seek to continuously refine production processes.
As US diplomat and economist Chester Bowles once remarked “government is too big and too important to be left to the politicians”.
I have asked leading economist, Nicholas Gruen, to work with me on this. Nicholas has championed the application of continuous improvement and total quality management processes to regulation.
Why can’t we use technology to bring front line regulators and the regulated together to improve regulation?
In the UK the Better Regulation Executive, which is part of the Department for Business, Enterprise and Regulatory Reform, coordinates work across government to reduce regulation.
So far 19 UK government departments and agencies have implemented over 280 initiatives to tackle red tape. These reforms are estimated to have saved UK businesses and non-profit organisations more than £800 million a year.
Part of the UK system includes a modern day version of the suggestion box – a website where businesses, community organisations and individuals can submit an idea for cutting red tape with a public response from government guaranteed within 90 days.
Innovative ideas like this which harness technology and allow people to better communicate with governments should be embraced.
Perhaps we can go even further. What about incorporating into individual regulatory regimes a simple way for people to give feedback or suggestions at the same time they are filling in online forms?
Sure, the old suggestion box in the corner of factory was often left abandoned and covered in cobwebs because management didn’t take suggestions seriously. But in this case, the people carrying the regulatory burden have a strong incentive to alleviate it. They just lack the means to do anything about it.
A small business owner often doesn’t even have the time to participate in an industry association, much less pursue a campaign for regulatory reform.
I want to break down the barriers impeding regulatory reform. Why has it taken so long to tackle the excesses of the Financial Services Reform disclosure regime?
Regulators should be directly and continuously subject to feed-back from business.
We shouldn’t need more Banks Reviews, because the operation of our own regulatory systems should be telling us where the problems are.
Over the coming months we will be talking to regulators, business, consumers and community groups about how we can change the culture of regulation.
We are serious about change.
I understand that business wants certainty and stability. I’m not seeking endless change for change’s sake. But that is no reason to allow excessive and unnecessary regulatory burdens to remain in place indefinitely.
My task as Australia’s first national Minister for Deregulation is an exciting and challenging one. There is much to be done.
Reducing the regulatory burden is critical to improving the efficiency and productivity of the Australian economy.
In general, Australians are pretty good as regulators. Our can-do attitude usually prevails.
But we’ve tended to rest on our laurels in recent years, after the great advances of the 1980s and early 1990s.We intend do better. The Rudd government is committed to continuous improvement. It’s my job to ensure we deliver.
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