The politics of 'deregulation' is changing, and it can't happen soon enough

When the Coalition is in change, it's called "The Department of Finance and Deregulation". But when Labor is in charge, it quickly gets cut back to just "The Department of Finance".

You might think it's just the name of a department, but there's no clearer symbol of the politics around deregulation.

For the political right, deregulation is about government getting out of the way so businesses can grow the economy and create jobs.

But for the political left, deregulation is code for a race to the bottom on the rights of workers, consumer protection, the environment and supports for the vulnerable.

This political narrative, however, is rapidly changing. And new research shows that it couldn't happen soon enough.

We see this change around the world.

In the UK, the centre-left government has introduced an action plan to reduce the burden of regulation by 25 per cent.

In Canada, the centre-left government introduced a rule where regulators must remove one regulation to offset any new regulation which gets added.

Even the European Union is focused on deregulation. It's Better Regulation agenda seeks to reduce the administrative burden of regulation by 25 per cent for all businesses and 35 per cent for SMEs.

Centre-left parties across the world are rethinking their approach to regulation. And Australia is no different.

"The Department of Finance" might not have changed, but the political narrative around deregulation has shifted markedly.

Deregulation is no longer a race to the bottom. It's now seen as the lowest cost and most effective way to get to the top.

We see it in speeches, in the Economic Reform Roundtable and in reports from the Productivity Commission.

Whether the goal is getting more renewable energy, lowering prices for consumers, or getting better healthcare, education and social services for the most vulnerable, reducing and simplifying regulation is seen as not only the most effective way of delivering it, but also the cheapest.

It couldn't happen soon enough.

New research from Mandala and the Australian Institute of Company Directors shows exactly how big the problem is.

The research shows that, no matter which way you look at it, regulation in Australia has grown rapidly over the past 20 years.

The number of acts of Parliament and legislative instruments sat around the 2200 mark for most of the 1980s and 1990s. By the year 2000, it almost doubled to 4000. By 2024, it doubled again, increasing 2.4-fold in just a couple of decades.

The number of pages in legislation increased, too: almost tripling from 2000 to today.

The legislative complexity index - a measure from the Australian Law Reform Commission on how complicated legislation is to understand and implement - increased 2.4-fold since 2010.

We can see it from the business perspective, too.

The time corporate boards are spending on regulatory compliance has increased 2.3-fold since 2015.

Using data from LinkedIn, the number of compliance-specific roles within businesses has more than doubled since 2010.

Healthcare, education and mining have seen the biggest increases in employment since 2010, but it's been driven by compliance roles, not innovation.

What's the cost of all this regulation?

The research used three different estimates, but they all point in the same direction. It found that regulatory compliance is costing Australian businesses $160 billion a year, or about 5.8 per cent of GDP.

This is a staggering number. The microeconomic reforms from Prime Minister Keating - probably the biggest reforms in Australia's modern history - lifted Australian GDP by 2.5 per cent, according to the Productivity Commission.

This means that the increase in regulation in just the past couple of decades has wiped out all these gains. Twice.

But are these regulations justified? After all, with climate change, technology change and a more complicated global economy, doesn't it make sense that regulations would need to increase?

This is undoubtedly true. The problem is that, when we compare Australia to other countries, it becomes pretty clear that we aren't getting anything in return for our much higher levels of regulation.

Australia is much worse than the rest of the OECD in terms of our regulatory burden. We are more than twice as bad as the UK and growing much faster.

More importantly, there is no evidence we are getting anything in return for this. In fact, whether its productivity overall or the time it takes to get a construction permit to build a house, Australia does much worse.

What to do.

There are simple things we could do like raising reporting thresholds and raising climate disclosure thresholds so more small and medium businesses are shielded from the regulatory burden.

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But we need to do more. We need institutional change to solve these problems: stronger scrutiny of new regulations, post-implementation reviews, national harmonization to reduce overlapping rules and getting regulators out of policymaking.

Economists call it the "productivity paradox" - the confusing observation that, despite huge advances in technology, productivity has been weak.

This research suggests that perhaps there's no paradox at all. Turns out, what computing gives, Canberra takes away. A new approach can't come soon enough.