Underpinning the way we live today is a complex regulatory framework. From doing business to how we are educated, from where we live to how we play: modern society is a reflection of the rules that govern our behaviour. Laws sit at the centre of our regulatory framework. Legislation is just one form of regulation, reflecting direct government intervention.
- self-regulation, such as industry participants entering into voluntary codes of conduct
- quasi-regulation, where governments incentivise businesses to comply
- co-regulation, where industry develops its own arrangements, which are subsequently underpinned by government legislation
Striking a balance between the costs and benefits of regulation isn’t easy. While compliance can be burdensome, it is also critical to protecting public interest. On the other hand, overly complex or onerous regulation can impede innovation and slow productivity. Estimates of the annual cost of compliance in New South Wales range between $11 and $87 billion per annum. At the top end, this reflects almost 14 per cent of State Gross Product: a massive cost borne by NSW residents.
The challenges faced by regulators today are exacerbated by the rapid pace of technological change. New innovations can disrupt markets overnight, putting regulators on the back foot. Regulators are constantly amending and adapting our regulations; in New South Wales a piece of regulation is amended on average 104 times.
This report explores the regulatory framework in New South Wales, the challenges regulators face in ensuring regulation is fit-for-purpose, and identifies opportunities for the development of a roadmap for regulatory reform to enhance the productivity of our State. It also shows how leveraging advanced analytics and artificial intelligence (AI) technology can help regulators target the greatest opportunities for reform.
Even small improvements to our regulatory framework have the potential to drive significant economic benefits. A saving of just 5 per cent of compliance costs in New South Wales could result in a net benefit between $0.6 billion and $4 billion. More broadly, a favourable regulatory environment has been shown to lead to greater foreign direct investment, boost productivity and increase our innovation capabilities.
Improving the New South Wales regulatory framework will require addressing a range of features across our regulatory system. Yet, there’s an opportunity to speed up the process. In the same way that AI and advanced analytics are revolutionising sectors like agriculture by helping to optimise yields, they can also be used to help fast-track the process of regulatory reform. Being able to identify where regulation is restrictive or especially burdensome helps regulators target laws that are not fit-for-purpose. This, in turn, accelerates regulatory improvements, driving long-term benefits for the NSW Government, businesses and residents more broadly.