The purpose of this paper is to analyse the extent to which regulation has undermined business creation in Australia. To do this, this paper develops the novel methodology of combining the business entry statistics provided by the Australian Bureau of Statistics with the count of federal regulations provided by the RegData Australia dataset. RegData provides a count of regulation by tallying the number of ‘restrictiveness clauses’ found in a body of legislation and its associated regulation. Restrictiveness clauses indicate a legal obligation through the use of the words “shall”, “must”, “may not”, “prohibited”, and “required”. Counting those restrictions provides a proxy for the overall level of regulation. This paper uses a count of regulatory restrictions contained in legislation and delegated (or subsidiary) legislation at the federal level. A more comprehensive overview of RegData can be found in Appendix A.

Based on this methodology, this paper estimates that the growth of regulation since the 2004-05 financial year is responsible for up to 398,000 businesses never being created. In other words, if regulation had been held constant – not even reduced – at 2004-05 levels an additional 398,000 businesses, in gross terms, could have been created between 2004-05 and 2018-19.