In the lead-up to the 2013 election the small businesses of Australia got together under the Small Business — Too Big To Ignore campaign. Their demands were for a fairer suck of that proverbial sauce bottle for the more than 2.5 million Australians who are small business people.
Between them, these people employ another five million Australian workers in local businesses such as bakeries, gift and homewares stores, grocery shops, butchers, chemists and bookshops. These great little enterprises run by hardworking people bear an increasingly large compliance burden that is making life tougher for them, prices higher for their customers and hours less plentiful for their staff. Sixty per cent of these businesses are sole traders and 85 per cent have fewer than five employees to deal with the reporting, monitoring and compliance required of them.
There is no regulatory affairs division at the neighbourhood dry cleaner. Nor is there a regulation unit at many of the half million not-for-profits that are small businesses. They are increasingly diverted from their charitable works by rules regarding fundraising, licensing, registrations, insurance, donations, volunteer vetting and administration.
While most regulations in isolation make some kind of sense, the sheer number of them is making less sense. In 2005, then Productivity Commission chairman Gary Banks noted that the amount of regulation in Australia had been growing significantly for all of this century and across all levels of government. He mused: “One is left wondering how, if all this is necessary, people ever managed in earlier decades?”
While regulators have good intentions to ensure cleaner water, safer roads or less explosive Christmas toys, this growing body of rules has to be implemented by people who are not only inexpert but also extremely busy.
Under the previous government, a further 21,000 new regulations were added to the mountain. The incoming government pledged to begin reducing it with two annual regulation repeal days.
The first regulation repeal day did away with more than 9500 rules. Among the predictable low-hanging fruit of superseded Acts and redundant provisions pertaining to imperial measurement were some genuinely helpful changes. Employment agencies will no longer have to keep paper records, businesses will be allowed to operate under one workers’ compensation scheme and mobile phone contracts will be simplified, saving $22.02 million a year.
A larger win for small business was the announcement that as part of repeal day measures, legislation would be introduced to have paid parental leave payments administered directly by the Department of Human Services unless employers choose to do it themselves, as they are currently required to. The estimated annual savings are about $48m.
This was one of the “big four” reforms nominated by the Small Business — Too Big To Ignore campaign. First was to cut red tape; second was to simplify the tax system; third was to make it easier to employ people; fourth was to build better infrastructure.
Cutting red tape sounds straightforward, but the problem with regulations is that every single one of them exists for a reason — often a sensible reason. Whenever someone dies from bad food, is injured at a poorly designed intersection or lodges an over-height truck in the mouth of a freeway tunnel somebody always demands that something be done. And then a lot of other people wind up paying to ameliorate a risk that might have seemed less worth eliminating if we could see equally clearly the losses of jobs, increasing prices and forgone services. As Banks noted in 2005: “A fundamental driver of the demand for regulation in recent years has been increasing ‘risk aversion’ in many spheres of life. Regulation has come to be seen as a panacea for many of society’s ills and as a means of protecting people from inherent risks of daily life … The pressure on government to ‘do something’ is heightened by intense, if short-lived, media attention (sometimes referred to as the ‘Alan Jones Syndrome’)”.
The challenge for the deregulation crusader Josh Frydenberg is to start a debate that tests regulation not one rule at a time — a basis on which the rule will generally stand — but in a whole-of-society framework. Once we understand these rules have a high social cost we can make the hard choices and trade-offs that lasting deregulation will require.
Cassandra Wilkinson works at the Centre for Independent Studies.
Home > Commentary > Opinion > Slashing red tape requires a broader view of social costs
Slashing red tape requires a broader view of social costs
In the lead-up to the 2013 election the small businesses of Australia got together under the Small Business — Too Big To Ignore campaign. Their demands were for a fairer suck of that proverbial sauce bottle for the more than 2.5 million Australians who are small business people.
Between them, these people employ another five million Australian workers in local businesses such as bakeries, gift and homewares stores, grocery shops, butchers, chemists and bookshops. These great little enterprises run by hardworking people bear an increasingly large compliance burden that is making life tougher for them, prices higher for their customers and hours less plentiful for their staff. Sixty per cent of these businesses are sole traders and 85 per cent have fewer than five employees to deal with the reporting, monitoring and compliance required of them.
There is no regulatory affairs division at the neighbourhood dry cleaner. Nor is there a regulation unit at many of the half million not-for-profits that are small businesses. They are increasingly diverted from their charitable works by rules regarding fundraising, licensing, registrations, insurance, donations, volunteer vetting and administration.
While most regulations in isolation make some kind of sense, the sheer number of them is making less sense. In 2005, then Productivity Commission chairman Gary Banks noted that the amount of regulation in Australia had been growing significantly for all of this century and across all levels of government. He mused: “One is left wondering how, if all this is necessary, people ever managed in earlier decades?”
While regulators have good intentions to ensure cleaner water, safer roads or less explosive Christmas toys, this growing body of rules has to be implemented by people who are not only inexpert but also extremely busy.
Under the previous government, a further 21,000 new regulations were added to the mountain. The incoming government pledged to begin reducing it with two annual regulation repeal days.
The first regulation repeal day did away with more than 9500 rules. Among the predictable low-hanging fruit of superseded Acts and redundant provisions pertaining to imperial measurement were some genuinely helpful changes. Employment agencies will no longer have to keep paper records, businesses will be allowed to operate under one workers’ compensation scheme and mobile phone contracts will be simplified, saving $22.02 million a year.
A larger win for small business was the announcement that as part of repeal day measures, legislation would be introduced to have paid parental leave payments administered directly by the Department of Human Services unless employers choose to do it themselves, as they are currently required to. The estimated annual savings are about $48m.
This was one of the “big four” reforms nominated by the Small Business — Too Big To Ignore campaign. First was to cut red tape; second was to simplify the tax system; third was to make it easier to employ people; fourth was to build better infrastructure.
Cutting red tape sounds straightforward, but the problem with regulations is that every single one of them exists for a reason — often a sensible reason. Whenever someone dies from bad food, is injured at a poorly designed intersection or lodges an over-height truck in the mouth of a freeway tunnel somebody always demands that something be done. And then a lot of other people wind up paying to ameliorate a risk that might have seemed less worth eliminating if we could see equally clearly the losses of jobs, increasing prices and forgone services. As Banks noted in 2005: “A fundamental driver of the demand for regulation in recent years has been increasing ‘risk aversion’ in many spheres of life. Regulation has come to be seen as a panacea for many of society’s ills and as a means of protecting people from inherent risks of daily life … The pressure on government to ‘do something’ is heightened by intense, if short-lived, media attention (sometimes referred to as the ‘Alan Jones Syndrome’)”.
The challenge for the deregulation crusader Josh Frydenberg is to start a debate that tests regulation not one rule at a time — a basis on which the rule will generally stand — but in a whole-of-society framework. Once we understand these rules have a high social cost we can make the hard choices and trade-offs that lasting deregulation will require.
Cassandra Wilkinson works at the Centre for Independent Studies.
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