Government needs to remove the barriers to business dynamism
Industrial relations and overbearing regulators are making life harder for Australian businesses, but it doesn’t need to be that way.
Allegra Spender Member for Wentworth
With rising insolvencies and falling per capita GDP, it has never been more important to make Australia the best place in the world to start and grow a business.
If I ask entrepreneurs what they need from Canberra, the immediate response is almost always for government to stay out of their way! In more reflective moments, they identify three key things they need: broadly stable and competitive economic settings, the ability to find the right people and manage them flexibly, and making it easy to deal with government and comply with regulation.
The government is making useful progress in some areas, including skilled migration settings, childcare, competition reform and the Safeguard Mechanism. In other areas, particularly industrial relations, it has made some own goals. But the economic challenges we face – including net capital exports, low R&D spending, and poor public sector productivity – demand much more from this government. They must use next month’s budget to go further.
Addressing the investment drought is essential. At the federal level, an increased investment allowance would help support investment, particularly for key parts of the clean energy sector. At the state level, moves to abolish stamp duty and eliminating the double taxation of insurance premiums would also help. Where state reforms have a negative budget impact, the federal government should step in with fiscal support, just as the Keating and Howard governments incentivised previous state reforms under the National Competition Policy.
Industrial relations is this government’s Achilles heel. They talk about the need for productivity growth, but recent reforms have hurt workplace flexibility and set businesses back. At least some effects could be mitigated by engaging in genuine award simplification, which would make enterprise agreements simpler, unlock greater flexibility right across the workforce, improve competitiveness, and deliver real, productivity-based wage gains for workers. This could be done quickly and at minimal cost with a little political goodwill.
Public sector productivity is a black hole in our economy, sucking in huge amounts of public resources without a clear understanding or measurement of what we are getting in return. This isn’t just about public service delivery, but also the cost that regulation imposes on the rest of the community.
In the words of one CEO, ‘regulators have no natural predators’. We need to be vigilant of the unchecked growth of the regulatory apparatus.
I hear about those costs from across the economy: childcare workers who complain of spending more and more time ticking boxes and less time caring for children, researchers who spend a quarter of their work hours on government grant applications, businesspeople navigating complex FIRB or R&D Tax Incentive rules, and everyone who is forced to wait for months on overdue government decisions.
Of course, regulations and probity are critical to our economy and protections. But, in the words of one CEO, ‘regulators have no natural predators’ and so we need to remain vigilant of the unchecked growth and unaccountability of the government’s regulatory apparatus.
This is easier said than done. Red tape reductions fail more than they succeed, but it is essential we keep iterating and innovating. In this budget, the government could require every regulatory agency to give an executive responsibility for deregulation: a poacher sitting among the gamekeepers, overseen by a new Minister for Better Regulation. They should work with stakeholders in each sector, to identify measures of effective government processes – such as approval times or process simplicity – and set targets with parliamentary accountability.
Each of these are pragmatic, constructive changes that aren’t ideological and could be implemented this year. And each would help make Australia the best place in the world to start and grow a business.