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Five principles of red tape reduction 578 KB

Red tape is one of the biggest constraints on economic opportunity, business investment, and job creation in Australia. Recent IPA analysis found red tape reduces economic output by $176 billion each year. This cost captures forgone human potential – all of the businesses which are never started, the jobs that are never created, and the dreams which are never fulfilled.

Governments of both persuasions at the state and Commonwealth level have attempted to reduce red tape for years. However, these attempts have fallen short because they were too narrow in scope and lacked ambition. Only a complete overhaul of Australia’s regulatory system will deliver the reduction to red tape that is needed to re-invigorate Australia’s economic prospects.

This overhaul must involve unchaining businesses – large and small – as well as community organisations and everyday Australians from the imposing web of regulations they face at every stage of project development. Projects from large iron ore mines, to setting up a café, to doing home renovations, are met with unnecessary and often petty bureaucracy that slows or discourages the undertaking of such projects.

This paper provides five principles policy makers should follow when implementing new proposals to minimise the amount of associated red tape. Those principles are:

  • 1. Eliminate the need for approvals, and replace with an inspection and reporting regime.
  • 2. Embrace market-based solutions.
  • 3. Harness the benefits of economic competition.
  • 4. Follow subsidiarity by decenteralising regulatory authority.
  • 5. Minimise interaction with government

The first of these principles is the most dramatic. It calls for policymakers to remove the need for project proponents to seek permission from government officials to undertake a project. This means anyone, anywhere, could implement a new project – such as setting up a new mine or establishing a restaurant – without needing the permission of government.

Project proponents would still need to follow whatever general rules exist (health and safety, for example). However, instead of needing permission before commencing a project, governments would enforce these rules through periodic, risk-based inspections.

Such bold change must be embraced if Australia is to come out of its economic malaise and again become an attractive destination in which to do business.

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