29 October 2014
Speech - #2014023, 2014

Address at the launch of the Deloitte Access Economics ‘Unleashing Productivity’ report, Canberra

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Thank you Gerhard for that introduction, and I thank you very much ladies and gentlemen, for inviting me to launch Deloitte Access Economics' report "Get out of your own way - Unleashing productivity".

I love the title. And, as usual, you've produced something that is both incisive and accessible.

Productivity and cutting red tape are at the heart of this Government's mission to build a strong and prosperous economy for a safe and secure Australia, and this report goes to the heart of the issue.

We are all aware that excessive and unnecessary regulation hurts productivity, deters investment and innovation, and costs jobs.

When excessive red tape lowers productivity, it ultimately lowers growth and the standard of living for all Australians.

As part of our deregulation agenda, we have overhauled the process for creating, implementing and reviewing new regulations. That includes implementing a process within Government whereby the costs and benefits of additional regulation are carefully balanced.

We are serious about driving cultural change throughout the public service.

Before the election, we promised to reduce the cost of red tape by $1 billion each year.

As of today, the repeal measures announced by the Government will save individuals, businesses and the not-for-profit sector over $2.1 billion in compliance costs.

So we have more than doubled our effort in just over 12 months.

Today, is the second of our 'Repeal Days' in the House of Representatives.

We will repeal nearly 1,000 unnecessary pieces of legislation and regulations and 7,200 pages of legislation and regulation.

This is of course, on top of last autumn's Repeal Day, which repealed over 10,000 pieces and 50,000 pages of legislation and regulation.

We are removing unnecessary and overlapping regulation. A good example of this is where regulation at different levels of government overlaps, such as environmental approvals. To address this, the Coalition's 'One Stop Shop' on environmental regulation will cut business costs and improve investment conditions.

But we accept that some regulations are necessary, like those around greater transparency, removing corruption, and improving health and safety. For example, no-one would accept that having seat belts is a bad regulation.

Improving Australia's productivity

Why is addressing the issue of over regulation so important?

Well, as the Deloitte report shows, red tape is strangling our economy.

It is a handbrake on the economy, and a speed limiter on innovation.

Indeed, as the Deloitte report contends that red tape is the biggest single drag on our nation's productivity.

Improving productivity, as you know, is one of this Government's highest priorities.

Productivity growth has been the key long-run determinant of income growth for Australians. It accounts for an average of 90 per cent of growth in incomes over the past four decades, and 96 per cent in the 1990s.

But, since the beginning of this century, productivity growth has seen a broad-based slowdown.

Slower productivity growth, with falling terms of trade and an ageing population, presents significant challenges for our future.

That's why productivity improvements are essential for improving Australians' living standards. And productivity improvements will maintain Australia's attractiveness as an investment destination.

As a result, the Government has prioritised several broad reform agendas to boost productivity growth.

We need to improve the flexibility, robustness and competitiveness of our economy. We are taking action on a number of fronts, and we are examining many of these aspects through the Competition Policy Review, the Productivity Commission review of the Fair Work Laws, and the Financial System Inquiry.

We've also prioritised reducing the regulatory burden, because it can help business operators use their resources more efficiently and thereby improve productivity.

Small businesses are particularly burdened by regulations because they usually don't have the resources or specialised staff to deal with compliance requirements.

Unnecessary regulations have the potential to constrain not only the way resources are used, but also the goods and services that are produced.

Over the last ten years, around 60,000 pages of Commonwealth legislation have been passed.

At last count, in 2007, there were almost 100,000 pages of Commonwealth legislation and around 90,000 pages of subordinate legislation.

And that was the stocktake taken seven years ago.

Add to that all the pages of quasi-regulation, guidance material, legal opinions and accounting advice you need to interpret it all.

And on top of that you have all the state and local government regulation.

The Productivity Commission estimated that regulation compliance alone costs as much as 4 per cent of Australia's GDP.

It's important to highlight that the cost of regulation is not only incurred when new regulations are made. Regulations need to be administered, and when a regulator changes how they administer a regulation, this adds to the cost of regulation.

For example, if a regulator changes a form or if they 'clarify' a regulation that people could interpret differently, businesses and individuals must then familiarise themselves with the new paperwork.

In fact, as the 2013 Productivity Commission report on Regulator Engagement with Small Business showed the way regulations are perceived, depends as much on the way they are implemented as the content of the regulations.

So the quality of engagement — that is, striking the right balance between optimising compliance and minimising compliance costs — can be as important as the amount of regulation itself.

That's why the Government is developing a Regulator Performance Framework to measure the performance of Commonwealth regulators.

This framework will ensure that regulators are taking steps to reduce red tape and improving both their overall performance and their engagement with individuals, businesses and the community.

The Government has also issued 'charter letters', or statements of expectations, to regulatory agencies.

In the Treasury portfolio, eight agencies received such letters, including the ATO, ASIC, APRA and the ACCC. Each of them is subsequently responding with a 'statement of intent' that sets out their commitment to deregulation.

So there is a lot of work going on in the deregulation space.

And that's as it should be, because there is no other option for Australia – we simply must cut red tape in order to address our productivity challenge or risk a decline in our living standards.

The Deloitte Report - Key findings

So 'Get out of your own way - Unleashing productivity' is both timely and thought-provoking, particularly in its suggestion that red tape is just as much of a cost constraint on the economy in the private sector as it is in the public sector.

I was quite surprised that, according to the report, the largest source of growth in rules and regulations may actually be from the private sector itself.

In fact, Deloitte estimates that self-imposed rules in the private sector cost $21 billion a year to administer, and generate $134 billion a year in compliance costs.

That's a staggering $155 billion a year to administer and comply with self-imposed rules and regulations.

When combined with the costs of red tape in the public sector, which you estimate at $94 billion a year, the total cost amounts to a quarter of a trillion dollars a year.

If these numbers are correct, and we'll take a good look at them, a cost saving of just 10 per cent of that total would equal nearly $25 billion in savings.

To say that there are significant savings to be achieved from cutting red tape would be an under-statement.

That extends not only to the immediate dollar savings, but also to the benefits that flow on from unleashing Australian innovation and enterprise.

Excessive regulation stifles enterprise and with it economic activity.

In other words, the economy-wide benefits of deregulation are potentially much greater than the savings from reducing compliance costs, because they also increase the overall efficiency of the economy.

What has the Government done to date?

So deregulation is crucial. Cutting red tape frees up business to do what they do best – creating the jobs of the future, raising living standards, and addressing the productivity challenge.

I am proud to say that this Government has delivered on its promise to cut $1 billion a year in red tape. In fact, we have over-delivered and have made significant progress in reversing the culture of regulation in government.

For instance, the Government's repeal of the carbon tax and the mining tax has not only reduced cost of living pressures and helped create jobs, but has also reduced compliance costs for families and businesses.

Let me briefly outline the three main areas the Government is focusing on in terms of deregulation:

First, we want to make interaction with government for individuals and their businesses less complex, less costly and more time efficient.

This is where better use of technology is key.

The creation of MyGov, for example, has seen more than five million Australians establish their own account to access a range of government services, from Medicare to Centrelink, in a single, centralised online portal, saving more than $50 million in compliance each year.

MyTax, which is linked to MyGov, will save close to $160 million each year and assist 1.4 million Australians by pre-populating tax returns.

The second area is removing inefficient regulations that impose costs that outweigh the community benefit for which they were intended.

We are also controlling the flow of new regulations by enforcing a stricter process for Regulation Impact Statements that requires, among other things, that no regulation be imposed unless it offers the greatest net benefit of available options.

And we are reducing the stock of existing regulation by holding two parliamentary repeal days every year to cut unnecessary and costly legislation and regulation. On top of all that, we're conducting a whole-of-government stocktake of existing regulation.

More than 32,000 small businesses with no payable GST will be exempted from the requirement to lodge a Business Activity Statement. Another 340,000 small businesses that submit their BAS, but have minimal income, will no longer be required to comply with the Pay As You Go requirements.

The third main area we're focussing on is a deregulation agenda that boosts inbound investment while reducing costs for Australian exporters, making them more competitive overseas.


As you can see, the Government is doing a lot of work, but you will agree that there is more work to do. Indeed, the deregulation battle has only just begun. Red tape is a burden on our economy no matter where it lies.

So it is very heartening to see the battle being taken to all forms of red tape, whether in the public sphere or the private sphere.

I look forward to working with business and community groups to unleash Australia's productivity and build a strong foundation that will sustain our living standards into the future.

I commend Deloitte Access Economics on the release of its report and for continuing the conversation about productivity.

Thank you.

View the transcript of the Q&A Session that followed this address