Government gets B for consistent effort on reforms, but will have to lift its game

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CIS recently hosted a visit from Institute of Economic Affairs Director of Lifestyle Economics Christopher Snowdon who summed up nicely the problem with regulation: “A lot of people are very good at doing benefit analysis”.  Costs are easily forgotten. Especially non cash costs like time, forgone opportunities and sheer frustration.

Between 2010 and 2013 an Act of Parliament was passed every two days, adding 21,000 new regulations to public, private and professional activities. Commenting on the Abbott government’s second Regulation Repeal Day, opposition spokesman Senator Joe Ludwig countered that the Gillard government had, “repealed over 16,000 acts, regulations, legislative instruments – without a fanfare” so in a spirit of goodwill let’s call it 5,000 additional rules. That’s nearly 3 new rules every day for three years.

All these rules add time, cost and confusion to daily life and deadweight losses across the economy. The Abbott government was elected with a commitment to cut $1 billion a year in red tape costs. Since the election, the PM has chalked up $2.1 billion in red and green tape savings for the business and not-for-profit sectors. To weigh the government’s boasts consistently with its bleats, we should at some point have a net figure that adds in the costs associated with the national security rules but that will need to be calculated once the full extent and impact of changes like metadata are clear.    

Senator Ludwig has criticised the government for passing off the usual abolition of redundant provisions such as the Spirits Act 1915 as regulatory reform which he says in the usual course of events, “always takes care of itself. The departments do this as part of their ordinary work. Departments will tell you that legislation such as this, old statutes, will come up, get written off and get binned. You don’t need a flying squad.” As is so often the case with politicians, he is a bit right and a bit wrong.

This latest round of reform has delivered a few minor fixes, so that for instance cattle headed to the EU no longer need a green tag on their tail — but it’s also got some meat in it.  A full list is here http://www.cuttingredtape.gov.au/2014-spring-repeal-day but these are the top three:

  • reducing duplication through a one-stop shop for environmental approvals $426.3m
  • streamlining income tax returns using MyTax $156.0m
  • making it easier for Australians to access government services $88.0m

Of these measures the biggest saving is from getting the commonwealth further out of the business of environmental approvals. States and territories will be able to autonomously approve projects consistent with the Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act).

The MyTax initiative will allow approximately 1.4 million taxpayers access to an automatically pre-populated electronic income tax return. 

The myGov service has been established to provide secure access to several departments. The clearest saving comes from allowing electronic mail from Centrelink, Medicare and Child Support to save the cost of posting 23 million letters.  A sad day for Australia Post but a happy one for taxpayers.

However, the really big deregulation opportunities remain to be addressed. Several of them can be found in the COAG Reform Council’s (CRC) final report on the National Partnership (NP) to deliver a Seamless National Economy [declaration of interest – I worked on this report].

The CRC report noted that at the outset of the NP, the Productivity Commission estimated that full implementation of the Seamless National Economy reforms would lower the cost of doing business by $4 billion a year and deliver productivity improvements capable of increasing GDP by up to $6 billion. 

A good half of the original agenda remains incomplete, or implemented in letter rather than spirit. Nationally uniform OHS laws have not been fully achieved despite estimated benefits of up to $480 million a year – roughly the same figure as the headline item in this year’s repeal day. Also incomplete are national consumer credit reforms that the Productivity Commission estimated to be worth in $1.5 billion to $4.5 billion per year back in 2008.

There are massive gains to be realised in properly deregulating the national electricity market. This task will become more urgent once people realise how little saving they get from not paying the carbon tax.  A more serious cause of rising prices over the last decade has been regulatory gaming.  Similarly, national transport regulation is a rich source of economic gains for a government willing to take on the tough challenges.  

If the commonwealth is going to go after the real savings in power, transport and infrastructure it will need to work with the states. When it is ready to do that, the CRC left some advice – you will have to bring cash to the table.  “Governments” CRC noted, “have made better progress implementing the reforms that attract reward payments than they have made on the reforms that do not attract reward payments”. During the NP, governments completed 21 of 26 reforms attached to payments but only 10 of 19 reforms without payments.

National competition reforms were greatly aided by the use of reward payments. Not only did it motivate Premiers who didn’t want to lost money to other states, it gave Treasurers the leverage they needed over line Ministers to drive unpopular or poorly understood programs of deregulation or reform.  

The government gets a B for consistent effort but will have to considerably lift its game to deliver the benefits of real market deregulation to Australian consumers, employers and taxpayers.

Cassandra Wilkinson is the External Engagement Manager at the Centre for Independent Studies.