Deregulation: past successes and failures; future bonfires?

I have a piece on successes, failures and prospects for deregulation in the AFR this morning which actually complements a terrific piece by Mark Latham (I kid you not).

This year marks the thirtieth anniversary of when an Australian government first turned its attention to combatting excessive regulation.

In 1984, Prime Minister Bob Hawke, questioning a Labor Party philosophy that stressed greater political control over the economy, said Australia had, “accumulated an excessive and often irrelevant and obstructive body of laws and regulations”. Thirteen priority areas of over-regulation were identified.  And procedures were introduced to curb the flow of new regulations.  These included requirements for new regulatory proposals to be accompanied Regulation Impact Statements overseen by a regulatory gatekeeper, now called the Office of Best Practice Regulation.

An early estimate placed the costs of business regulation at 16 per cent of GDP, while acknowledging that there were offsetting benefits.

Included among the designated priority areas for review were export controls over a range of mineral and agricultural goods, financial market regulations and transport including air services.  In all of these areas the following decades saw deregulatory reforms, which were key to the prosperity Australia has enjoyed.

There was less success in other activities identified as being deregulation targets.  These included the building codes, controls over chemicals, food laws and child care regulations.  Those areas are among the many where we have seen costly new rules and government intrusions, in spite of a great numerous reviews.

We currently have yet another inquiry (conducted by the Productivity Commission) into child care, one of the notable failures among the 1984 activities targeted for regulatory review. The Productivity Commission estimates that child care costs have doubled in real terms over the past decade.  Consult Australia reckon it now costs an astonishing $59,000 a year for two children to be looked after in long term day care. One regulatory feature alone, the National Quality Framework (NQF) was calculated by the government to add costs of over a $160 million dollars a year due to excessive staffing requirements.

One outcome of a regulatory instrument is that, even if it is not introduced at the behest of a vested interest, it creates new pressures for its retention from who make investments on the basis of the rules put in place.  This makes it difficult to reverse the process.  Even in child care, those who have responded to government over-accreditation NQF requirements would resist the influx of people who have not had to make the same sacrifices as themselves to become accredited even though the qualifications are superfluous.

We can see similar pressures operating in the case of housing.  The overwhelming cause of the excess house prices found in all Australian cities is the regulation of land supply through the planning process.  Once in place, egregious regulations of this kind that restrain supply attract support from those obliged to make investments in response to them.

Thus, the Real Estate Institute in its pre-budget submission to the Commonwealth makes several sensible proposals to assist cost containment but does not address the freeing up of development land.  It cannot do so since its members, in accordance with sound business practice, have invested in land stocks, the price of which are inflated by the which the regulations.  They would lose money with deregulation which would bring more land onto the market and cause prices to fall.  The present losers – those unable to afford homes at today’s excessive prices – have no lobby group to promote their cause.

Clearly, the efforts to roll back the stock of excessive regulations have been, at best, mixed.

In addition, during the thirty years since procedures were introduced to vet new regulations these have demonstrably failed.  The number of pages of regulations has increased exponentially over the past three decades. Unfortunately during the six years of Rudd/Gillard governments,

Labor totally abandoned the agenda originally laid out by Bob Hawke.  At least 4,300 major new regulatory measures were introduced together with thousands of minor changes and amplifications to existing.

We now have a renewed assault on regulatory costs with an industrious Parliamentary Secretary, Josh Frydenberg, specifically tasked to assist Tony Abbott in rolling back regulations.  Frydenberg has laid out an ambitious program to cut $1 billion a year in red and green tape.  The measures he has proposed include expediting approval processes, simplification of paperwork and an annual bonfire of regulations, the first scheduled for the end of March.

What we have seen since the Hawke initiative is considerable reduction in economic regulations like price controls, tariffs, monopoly supply arrangements, and privatisation.  We have seen these offset by increases in social regulations concerning the environment, workplaces, and safety as well as a huge increase in the paperburden.  Cutting into these areas will be the challenge for the Abbott Government.

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28 Responses to Deregulation: past successes and failures; future bonfires?

  1. Anto

    And yet, I heard Chris Bowen on ABC radio this morning bemoaning the fact that the Coalition did not have enough new laws before the Parliament!

  2. stevem

    The greatest example, to my mind, is the taxi industry. For some reason the issuing of taxi plates has been tightly restricted to the point that they fetch around $400,000. Every time a government decides the public needs to have more taxis on the road the vested interests yell and scream about how the world will end with every taxi owner on the streets if the government dare to issue any new plates. Meanwhile the unjustifiable cost of the plates is amortised across every taxi trip.

  3. Craig Mc

    We bag him when he’s mad, we should give him credit when he’s sensible. Good article.

  4. johanna

    Nice article, Alan.

    The last government that I can think of which achieved anything substantial in this regard was the Greiner government. And they didn’t do it by trawling through regulations looking for things to repeal.

    They started with a blank sheet of paper, rewrote the whole thing and completely repealed the old stuff. Thus, for example, the public sector employment Act and regulations, which ran to thousands of pages, was reduced to an 80 page primary Act and a couple of hundred pages of regs. Of course, over time the process of accretion began again.

    It is hard to see how the massive mess that is our tax legislation can ever be reformed on a piecemeal basis. The blank sheet of paper approach is the only thing that will work.

    You are right to point out that regulatory capture can go both ways. The way the ACCC works (especially in telecommunications) is a prime example of this. The complex regulatory framework entrenches big players with lots of lawyers and expertise against the smaller ones.

  5. .

    Bowen is a fool. To demand ever more and more law is asking to regress into poverty and to surrender your freedom totally.

  6. .

    It is hard to see how the massive mess that is our tax legislation can ever be reformed on a piecemeal basis. The blank sheet of paper approach is the only thing that will work.

    10% GST
    5% royalty tax
    2.5% LVT

    Which get halved over time under a TABOR. The money gets split out equally to the Feds, States and Shires on a per capita basis.

  7. Ant

    I wouldn’t get too excited.

    What they’ve extinguished regulatorily on the economic side they’ve come back with a baseball bat 3 times bigger in 3 key areas: OHS/WHS, Environment, Quality Management.

    All 3 are bottomless pits and all 3 are ripe for rorting taxpayer money big time for the political class and their crony consultant barnacles.

  8. brc

    Let’s talk about ADRs. An entire set of refutations supporting who knows how many busybodies, all which could be tossed by simply adopting European or Japanese safety standards. A move which would increase supply of vehicles to australia and lower the prices of new cars. If standards are good enough for the entire continent of Europe, they are good enough for this continent.

    The major problem is one of voter thinking. If there is a problem, do a vox-pop and you will get people on the street saying ‘the government should do something’. The Austrlaian population needs an about face on the usefulness of governments, and I don’t see how that can possibly come about.

  9. Ant

    By bottomless pits I mean you can never make anything “safe enough”, you can never make anything “environmentally sustainable enough”, you can never make anything “quality assured enough”.

    In the private sector the laws of economics tend to have a strong knack for eventually weeding out the rubbish and sending them bankrupt; whether their practices are unsafe, their production is environmentally damaging or their quality can’t compete.

    But when prostituted by government intervention and regulation it’s mostly counterproductive and often turns to crap.

  10. Empire Strikes Back

    I really hope Josh’s deregulation mission is a success.

    I hold very low expectations.

  11. dan

    The ironic thing is that if prices fell, and we could smooth out transaction costs by moving from stamp duty to land taxes, I suspect there would be far more mobility and more real estate transactions, which would be great for real estate agents. I don’t know that freeing up development land would actually reduce the income of the industry.

  12. Dianeh

    Bowen is a fool.

    Stating the bleeding obvious.

  13. thefrollickingmole

    Im currently paying $6000 to re-bitumise my shops carpark… Oh it was already bitumised from when it was a childcare center, but the standards have changed…

    Oh and my disabled toilet is 8cm too small (Australian standards) and my doorways are too narrow (Australian standards) etc, etc…

    Yet 2 existing shopping complexes have just gone through multi million dollar upgrades/refurbishments, yet their areas dont have to comply with the new standards because they havent “changed use”..

    Australian/NZ standards are the strangle weed of local government. They have people on 6 figure incomes whos job it is to pretend a mum and dad operation has to comply to new standards.

    Eg: The Australian standard for disabled parking has changed, basically a double car bay now. But wait… one side is painted stripy yellow…
    Now New Zealand standards also stipulate a bollard about 1/3 the way down the front of the stripy bit apparently to stop people from parking there. But our council has started putting the bollards in 1/2 way down the bay, making an obstruction for the “wheelies” when they get out..

    Not only are they “following the leader” blindly, they have so poor an understanding of their own regulations (which is their SOLE job) they have fucked it up.

    Carpark alone will cost me over 7-8 grand to “comply”, and in the end, be smaller.

  14. .

    I used to wonder why some shops didn’t have customer toilets, now I know.

  15. Ant

    tfm

    I demolished and built a new deck recently. In terms of its size/extent, it was an exact replica of what was there before.

    The council said that I had to erect ‘privacy screens’ to the west and east to stop overlooking into my neighbours backyard.

    I said “But, I’m not making the deck bigger. If I stand on the new deck my views into next door will be exactly what they are now.”

    They said that it didn’t matter. It has to comply with current regulations. I said “That’s stupid and a disincentive to improve a property asset, not to mention create jobs.”

    So I installed a bit of cheap treated pine lattice work. Got the occupancy permit and then removed the screens.

    Councils overflow with stupid.

  16. thefrollickingmole

    Ant

    Its worse than that, instead of looking at a problem and suggesting how to remove it or applying a common sense teast they walk around like brain dead zombies chanting “australian standards, australian standards” while (and this is literally) looking in the regulation book for “problems”.

    I have a 50 year old building, their response to the dunny being 8cm too small?

    Cant you just push the wall out a bit

    The bonfire of regulations has to start with the Australian standards organisations, they are a major, major productivity destroyer and barrier.

  17. .

    It might be worthwhile counting the cost of Australian Standards on Government entities as well – then they may listen/

  18. hzhousewife

    stunning.
    The NSW asbestos building stuff last year resulted in SIX visits to our shop, and the installation
    of a metal box with one piece of paper insde it out in the tea room. The wall that is supposed
    to contain asbestos is untouched (and unlicked). The man hours alone are ridiculous and
    I suppose the landlord paid, and therefore I do ultimately through rent.

  19. Ant

    I could punch away for a day about the encounters with stupid paper pushers ramming regulations down my throat. But I won’t, except to say one more thing.

    Energy Safe Victoria have their own safety standards. They, amongst other things, regulate what kind of material you can have as a kitchen splashback behind a gas cooktop.

    Recently for an apartment development, they were asked if they consider ceramic tiles to be non-combustible and would they comply?

    They sent a diagram and some text lifted out of their standard.

    It was ambiguous and didn’t include ceramic tiles. They were asked them to clarify. They said read our standard. They were told that it’s ambiguous, can’t they just confirm if ceramic tiles are acceptable. They said look at that standard. And on and and on and bloody on.

    The point for me and these pissants is this: IF YOU’RE NOT PREPARED TO STICK YOUR F—ING ARSE ON THE LINE AND ANSWER A SIMPLE F—ING QUESTION ABOUT YOUR OWN F—ING RULES WHY THE F— USE ARE THEY?

  20. Elizabeth (Lizzie) B.

    We have seen these offset by increases in social regulations concerning the environment, workplaces, and safety as well as a huge increase in the paperburden. Cutting into these areas will be the challenge for the Abbott Government.

    Good luck with that then. I’d go for Johanna’s blank sheet of paper approach.

  21. rafiki

    I was recently told an interesting story by a man whose expertise lies in understanding the Building Code and in particular those parts dealing with fire risks. Many of you will recall that a disgruntled employee set fire to a NSW nursing home and was subsequently convicted of several murders of elderly who could not be removed from the home in time. In the wake of that fire, the NSW fire service built a similar building to demonstrate the need for fire sprinklers, and a law was passed to mandate their installation. (This of course created a nice big earner for some, probably in more ways than the obvious.) My friend’s story was that this was a fake. The fire precautions in the home were adequate. The deaths occurred because egress was severely reduced after an OHS person required the installation of a balustrade opposite an egress door, such that the beds could not be turned easily.
    This is but one example of thousands of how the costs of building in Australia have been needlessly increased. A good part of the cause can be out down to the baleful influence of the unions and the Greens. Their influence has to be cut down.

  22. James B

    The childcare regulations that massively drive up the cause of childcare are a great thing. For years the government has conducted an assault on the family by attempting to force both parents to work and people to give up their children to the state, childcare centers, etc. All the regulations they’ve made in an attempt to make childcare “better” have actually destroyed their own objective. It’s now a rational thing for women to stay at home and raise the children, as they should. All we need to do next is privatise education, which acts as free daycare. Homeschooling must increase.

  23. JB

    A truly great idiocy is the one which gives councils the power to tell owners what they can or can’t do with their own trees. Anyone any experience or information on this?

  24. Gab

    A truly great idiocy is the one which gives councils the power to tell owners what they can or can’t do with their own trees.

    But if councilors couldn’t tell people what they can and cannot do on their own land we’d have less councilors and that just won’t do!

  25. Jim Rose

    “considerable reduction in economic regulations like price controls, tariffs, monopoly supply arrangements, and privatisation. We have seen these offset by increases in social regulations concerning the environment, workplaces, and safety as well as a huge increase in the paperburden.

    alan, gary becker and george stigler observed in the 1990s that apart from some repeals of price controls and barriers to market entry, regulation has marched onward and upward since the 1970s because of the growth of social regulation. peltzman observed in 1989 that:

    the simplicity of the point with respect to economic regulation-’ ‘prices are too high -may explain why regulatory reform was far more successful in that area than in many other areas where it was proposed, such as drug regulation, environmental regulation, and workplace safety and health regulation.

  26. Squirrel

    “JB

    #1206685, posted on February 27, 2014 at 8:06 pm

    A truly great idiocy is the one which gives councils the power to tell owners what they can or can’t do with their own trees. Anyone any experience or information on this?”

    Where to start…..it’s been covered before on this site, including quite recently. What amazes me, is that so many people resent it, to the point of infuriation, but no right of centre politician at the State level (so far as I am aware) has had the good sense to make an issue of it and promise either to take away, or greatly curtail, the power of local councils to make such rules. By way of refreshing comparison, I understand that the Keys Government did just that in NZ (and I assume they still have trees over there, in spite of the horror and outrage which doubtless greeted the changed laws).

    More broadly, I think the economic impact of local government regulation is worthy of close examination at a national level. Likewise, I am concerned at the thought of devolution/decentralisation to State Governments without clear signs of/requirements for a less regulatory approach to their activities – wouldn’t want to see armies of de-hired federal regulators simply re-locating to the State capitals (remember the many-headed Hydra!).

  27. nerblnob

    a baseball bat 3 times bigger in 3 key areas: OHS/WHS, Environment, Quality Management.

    All 3 are bottomless pits and all 3 are ripe for rorting taxpayer money big time for the political class and their crony consultant barnacles.

    Amen. Recently, I’ve had to supply our:
    anti-bribery policy
    anti-slavery policy
    anti-child labour policy
    for an Australian contract.

    It’s not enough that we’re too mean to bribe, pay well enough to retain good people in a competitive market, and don’t employ anyone under 45 – we have to write at least 25 words explaining what positive moves we are taking to prevent these evils from happening.

    As far as I can see, the scope for forcing people to assert how they are going about NOT doing whatever it is they don’t do anyway is infinite.

    Yes, I wrote many witty responses but eventually paid some leech to supply me with acceptable statements, which were obviously just C&P’d from something done elsewhere.

    Fuctifino, I think I’m in the wrong game …

  28. Jim Rose

    There are many countries where no one can do business without paying a bribe

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