Record red tape strangling Australian investment, IPA report finds
A new report from the Institute of Public Affairs (IPA) has found that Australia’s industry developers are having their hands tied behind their backs by a record level of “red tape”.
Despite governments across Australia declaring they are working to remove regulatory obstacles, new research has found that red tape at the federal level has increased by 88% since 2005 and is now at a record high.
And it is not only growing at the national level.
The research also found regulatory impediments are at a record high in every state, with Victoria recording the fastest growing volume of regulation since 2019, increasing by 4.75%.
Other increases in the same period include Tasmania up 4.7%, New South Wales up 3.5%, Queensland up 2.2%, South Australia up 1.8% and Western Australia up 1%.
Red tape outstripping economic growth
The study undertaken by IPA in partnership with George Mason University’s Mercatus Centre regulatory economics faculty, also found that red tape has expanded at a rate two-thirds greater than the overall growth in the national economy since 2005.
“Red tape created by state and federal governments is currently at the highest level in recorded history. With economic growth weak and government debt continuing to rise, Australia’s political leaders must cut red tape to unleash prosperity,” said Saxon Davidson, a research fellow at the Institute of Public Affairs.
The IPA also noted that regulations are increasingly lacking in transparency.
“Since 2005, 97% of all new regulations have been implemented by ministers and regulators, rather than normal parliamentary processes,” Mr Davidson said.
“There are currently over 370,000 regulatory restrictions currently imposed on businesses and individuals. This compares to less than 200,000 restrictions in 2005.”
Major growth impact
IPA also noted that red tape is a major impediment to productivity and economic growth, making it harder for businesses and individuals to be fruitful.
For example, previous IPA research found that to build an irrigation pivot on privately held pastoral land in Western Australia requires not less than eight different government permits and licences, making it harder for farmers to get on with their job or growing the food and fibre we need.
“Red tape diminishes the potential of Australia, as too many are faced with the increasing cost and unnecessary delay associated with bureaucratic paperwork, instead of being able to get on with the job of building our future,” Mr Davidson said.
$318 billion of investment at risk
The IPA findings match dire warnings made by the Chamber of Commerce and Industry WA (CCIWA) which estimated that regulatory delays are threatening $318 billion in investment.
The CCIWA report “Green Web: How Environmental Approvals Could Trap Australian Investment”, also estimated that tens of thousands of jobs could be on the line.
“We’ve heard from businesses that wait times have blown out by up to 18 months in the past five years in WA,” said CCIWA chief economist Aaron Morey.
“That’s 18 months of additional time for projects to languish on the shelf and the longer a project sits on the shelf, the greater the risk that investors lose patience and look to invest elsewhere.”
“There’s no doubt we need robust environmental regulation to protect our most precious assets, but when project proponents are being forced to jump through unnecessary hoops to get an approval they’re likely to look for a more predictable, less complex place to do business.”
Up to $1 million a day in costs
CCIWA members have told the chamber that 40% are considering abandoning their projects due to the delays, while 25% say they are at risk of scaling down projects by an average 40%.
According to the CCIWA, approval delays create a mountain of other costs, such as hiring consultants, holding materials and keeping on subcontractors and internal resources. Some businesses say these costs amount to up to $1 million a day.
Companies in the mining, agriculture, fisheries, construction, manufacturing, space and defence industries are among those who have expressed alarm at the increasingly complex patchwork of environmental regulation.
How to cut back on red tape
The IPA report came up with 10 recommendations for policymakers to consider, including the re-introduction of ‘Parliamentary Repeal Days’, whereby state and federal parliaments sit for two days each year to exclusively repeal or abolish legislation and regulations.
It also proposed an introduction of a ‘one-in-two-out’ rule, which has proven to be successful in the US. Under that guideline, two regulations are required to be repealed for every new regulation introduced.