Manufacturers spending $90 billion on overcoming government’s ‘red tape’

A survey released yesterday points to the high and still rising cost of complying with regulation for Australian manufacturing businesses.  

The report, from the Australian Industry Group and Deloitte called Business Regulation, claims the issue of ‘red tape’ for business compliance requires urgent government attention.

“At a time when pressures are intensifying to innovate and change business practices, the growing burden of business regulation is proving a barrier to innovation and growth,” says the report.

The report surveyed 322 CEOs from the manufacturing, services and construction sectors, across Australia.

It shows that the average business spends almost 4% of its annual costs on complying with regulation. 

“This is a major cost impost on business particularly at a time of ever-tightening margins and general global and domestic economic uncertainty,” it says.

Ai Group chief executive Heather Ridout claims ‘red tape’ is hurting the competitiveness and productivity of Australian manufacturers, despite the government claiming to support growth in this area.

"What is painfully clear from this report is the burden regulation is having on the costs of doing business in Australia. Despite all the talk of aspiring to be a seamless national economy our red tape burden is rising not falling.  Into this difficult environment, the Government is proposing to introduce a carbon tax which many respondents anticipate will be the major driver of increased compliance costs over the next three years,” she said. 

“This is a major concern for business productivity and competitiveness.”

The report also found:

–     Business regulations are hampering the ability of CEOs to improve their businesses by engaging in trade, introducing new products and services and changing work practices.

–     Around one-third of CEO respondents indicate regulations are a substantial barrier to employing more staff which is critical for business growth.

–     Some 70 per cent of respondents have experienced a rise in compliance costs over the past three years.

–     Over 75% of CEOs report that they expect a rise in compliance costs in the next three years.

–     Around 37 per cent of respondents anticipate that carbon pricing related regulation will be the major driver of increased compliance costs in the next three years. 

 Ridout says it’s not just manufacturing that’s being affected, either.

 "Other key areas identified as needing urgent action include occupational health and safety, workers compensation, industrial relations and regulations affecting the employment of labour and trading internationally,” she said.

 "Governments need to be proactive to address the regulatory burden and action should include: accelerating the implementation of the recent COAG reform initiatives; reviewing the effectiveness of state government initiatives to reduce the regulatory burden; making regulatory impact statements more consistent and transparent; and improving regulatory agency interaction with the business community.”

An interview with Ridout by ABC News on the report findings can be found here.

During the interview, Ridout claims that the 4% of annual costs businesses are reporting goes towards compliance translates to well over $90 billion across the economy. 

“And, this is not just about occupational health and safety and employment regulation more generally, it’s the cost of doing trade, both importing and exporting; its environmental regulation, and its tax regulation – state, federal and local,” she said.

“So there’s a range of areas, there’s a range of targets that our policy can have a look at and make some inroads into.”