Improving the Regulatory Improving the Regulatory Climate for Business: Climate for Business:

Experiences from AustraliaExperiences from Australia

Rex Deighton-SmithRex Deighton-Smith

Director,Director,

Jaguar Consulting Pty LtdJaguar Consulting Pty Ltd

Background to reformBackground to reform

Substantial economic reform Substantial economic reform program begun in the 1980sprogram begun in the 1980s

Reform driven largely by relative Reform driven largely by relative economic decline – slow growth economic decline – slow growth rates, incomes declining relative to rates, incomes declining relative to other OECD countriesother OECD countries

Focus on opening the economy Focus on opening the economy internationally, removing product internationally, removing product and labour market rigiditiesand labour market rigidities

The regulatory dimensionThe regulatory dimension

Reform initiatives were widespread Reform initiatives were widespread (tariff reductions, floating the (tariff reductions, floating the currency, independent central bank),currency, independent central bank),

But regulatory reform was a key But regulatory reform was a key element.element.

Most governments established Most governments established agencies with specific agencies with specific responsibilities: Offices of Regulation responsibilities: Offices of Regulation ReformReform

Different approachesDifferent approaches

Agreement on the need to free the Agreement on the need to free the economy, reform regulation to do it; economy, reform regulation to do it; butbut

Substantial differences in approachSubstantial differences in approach

What are the lessons from the What are the lessons from the different reform programs tried? different reform programs tried?

A selection of programsA selection of programs

Small Business Deregulation Small Business Deregulation TaskforceTaskforce

Business Licence Simplification Business Licence Simplification ProgramProgram

Regulatory Efficiency LegislationRegulatory Efficiency Legislation

National Competition Policy National Competition Policy AgreementsAgreements

Small Business Deregulation Small Business Deregulation TaskforceTaskforce

Established by Federal GovernmentEstablished by Federal Government All members from business sectorAll members from business sector Six month deadline for reportSix month deadline for report Received public submissionsReceived public submissions A specific task:A specific task:

to report to the Government on revenue-to report to the Government on revenue-neutral measures that could be taken to neutral measures that could be taken to reduce the paper and compliance burden on reduce the paper and compliance burden on small business by 50 per centsmall business by 50 per cent

Results?Results?

Report recommended many further Report recommended many further reviews (of tax, food safety, planning reviews (of tax, food safety, planning laws, etc)laws, etc)

Recommendations also included Recommendations also included some more specific proposals for some more specific proposals for reducing administrative burdensreducing administrative burdens

Overall, little concrete reform came Overall, little concrete reform came directly from this exercisedirectly from this exercise

LessonsLessons

An effective way of harnessing the An effective way of harnessing the business perspective;business perspective;

Some important issues identified;Some important issues identified; But the task was too great for an But the task was too great for an

“ad hoc” committee;“ad hoc” committee; No systematic follow-up; butNo systematic follow-up; but Some recommendations were Some recommendations were

ultimately acted on in the medium ultimately acted on in the medium termterm

Business Licence SimplificationBusiness Licence Simplification

Target of reducing the number of Target of reducing the number of business licences by 25 per cent;business licences by 25 per cent;

Co-ordinated by Office of Regulation Co-ordinated by Office of Regulation Reform; butReform; but

Licences identified for abolition by Licences identified for abolition by regulators;regulators;

Numerical target was met; butNumerical target was met; but Limited Limited real real impact on businessimpact on business

Lessons?Lessons?

Licence reduction an appropriate Licence reduction an appropriate target, but;target, but;

Poorly chosen outcome measures;Poorly chosen outcome measures; Lack of political authority;Lack of political authority; Responsibility for program elements Responsibility for program elements

poorly distributed;poorly distributed; No links to a broader reform programNo links to a broader reform program

Regulatory Efficiency LegislationRegulatory Efficiency Legislation

A law that would make a wide range A law that would make a wide range of regulations more flexible;of regulations more flexible;

Business able to propose alternative Business able to propose alternative means of complying with the means of complying with the regulatory objective;regulatory objective;

Approval by the responsible Approval by the responsible regulator;regulator;

Regulatory Efficiency Legislation(2)Regulatory Efficiency Legislation(2)

Originally pursued by a committee of Originally pursued by a committee of civil servants;civil servants;

Lack of agreement led to referral to a Lack of agreement led to referral to a Parliamentary CommitteeParliamentary Committee

Report recommended adopting the Report recommended adopting the proposed law;proposed law;

Not implemented by government;Not implemented by government; This initiative raised and rejected in This initiative raised and rejected in

Canada as wellCanada as well

Lessons?Lessons?

The concept was a “shortcut” to The concept was a “shortcut” to achieving reform – and giving achieving reform – and giving business a degree of control over business a degree of control over regulation;regulation;

But regulators (including Ministers) But regulators (including Ministers) feared loss of control;feared loss of control;

Complexity of the proposal meant Complexity of the proposal meant lack of support from business – the lack of support from business – the intended beneficiaryintended beneficiary

Some common elementsSome common elements

Programs were short-term in nature;Programs were short-term in nature; Limited links to a broader reform Limited links to a broader reform

strategy;strategy; Lacking in a strategic approach – Lacking in a strategic approach –

with only general links to a more with only general links to a more broadly understood concept of broadly understood concept of “business environment”“business environment”

Lack of institutional support within Lack of institutional support within governmentgovernment

National Competition PolicyNational Competition Policy

A long-term program begun in 1995A long-term program begun in 1995 Written agreements between all Written agreements between all

State and Federal GovernmentsState and Federal Governments An overarching purpose: An overarching purpose:

to maximise competition throughout the to maximise competition throughout the economy in the public interest, by economy in the public interest, by removing anti-competitive regulation removing anti-competitive regulation and implementing or extending pro-and implementing or extending pro-competitive regulationcompetitive regulation

Main elementsMain elements

Identifying all laws containing Identifying all laws containing restrictions on competition (1800 restrictions on competition (1800 Acts);Acts);

Reviewing and reforming them:Reviewing and reforming them:• legislation should not restrict legislation should not restrict

competition unless:competition unless: The benefits of the restriction to the The benefits of the restriction to the

community as a whole outweigh the costs; community as a whole outweigh the costs; andand

The objectives of the regulation can only The objectives of the regulation can only be achieved by restricting competition.be achieved by restricting competition.

Main elements (2)Main elements (2)

Extending the reach of the Extending the reach of the competition law competition law

Restructuring infrastructure based Restructuring infrastructure based industries (gas, electricity, telecoms) industries (gas, electricity, telecoms) to promote competitionto promote competition

Competitive neutrality between Competitive neutrality between government and private businessesgovernment and private businesses

Other reforms (transport, water) Other reforms (transport, water) brought within the frameworkbrought within the framework

Specific institutions taskedSpecific institutions tasked

National Competition CouncilNational Competition Council(Progress reporting, assessing requests (Progress reporting, assessing requests

for access to monopoly infrastructure)for access to monopoly infrastructure) Australian Competition and Australian Competition and

Consumer CommissionConsumer Commission(Enforcing competition law, determining (Enforcing competition law, determining

infrastructure access arrangements)infrastructure access arrangements) Competition Policy Units Competition Policy Units

(Co-ordination/reporting at State level)(Co-ordination/reporting at State level)

Results?Results?

Program continuing in its ninth yearProgram continuing in its ninth year Legislative reform substantially Legislative reform substantially

complete (c. 80%)complete (c. 80%) Major price reductions in a range of Major price reductions in a range of

infrastructure-based industries;infrastructure-based industries; Major increases in investment (e.g. Major increases in investment (e.g.

doubling of gas pipelines);doubling of gas pipelines); Overall, a clear improvement in Overall, a clear improvement in

macro-economic performance.macro-economic performance.

Lessons?Lessons?

Key contributors to the success of NCPKey contributors to the success of NCP Political support from all major Political support from all major

parties, and in major parts of the parties, and in major parts of the administration;administration;

Well designed institutional structure Well designed institutional structure Clear objectives, objective (and Clear objectives, objective (and

consistent) tests, regular reporting;consistent) tests, regular reporting; Transparency of process/resultsTransparency of process/results

Lessons (2)Lessons (2)

A dynamic focus:A dynamic focus:

• reviews to be repeated 10 yearlyreviews to be repeated 10 yearly

• New laws subject to the same testsNew laws subject to the same tests

Financial incentives for the States to Financial incentives for the States to pursue reformpursue reform

Lessons (3)Lessons (3)

Key challenges/problemsKey challenges/problems

The disciplines created were The disciplines created were insufficient to bind the Federal insufficient to bind the Federal Government adequatelyGovernment adequately

Lack of communication of the Lack of communication of the benefits of the reformsbenefits of the reforms

““Reform fatigue” and backlashReform fatigue” and backlash

Lessons (4)Lessons (4)

Perceived imbalances in benefits and Perceived imbalances in benefits and costs:costs:

• Regional dimensions;Regional dimensions;

• Compensating the losers.Compensating the losers.

Focusing efforts – “materiality”.Focusing efforts – “materiality”.

ConclusionsConclusions

Successful reform is a long-run task Successful reform is a long-run task & programs must be designed to & programs must be designed to suit;suit;

Reform is likely to require a Reform is likely to require a combination of approaches; butcombination of approaches; but

A clear focus on reform objectives A clear focus on reform objectives must be maintained, with each must be maintained, with each program being linked explicitly to program being linked explicitly to them.them.

Conclusions (2)Conclusions (2) Program design must address:Program design must address:

• Ensuring necessary authority (including Ensuring necessary authority (including political support);political support);

• Appropriate institutional design (incl. Appropriate institutional design (incl. expertise, authority, impartiality);expertise, authority, impartiality);

• Clear objectives and performance Clear objectives and performance criteria;criteria;

• Regular reporting and general Regular reporting and general transparency requirements;transparency requirements;

• Need for communication with Need for communication with stakeholders;stakeholders;

• Need for reform to be seen as a dynamic Need for reform to be seen as a dynamic process, not a “one-off” activityprocess, not a “one-off” activity