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Growing red tape burden holding back business growth and innovation


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27 September 2011: The latest Australian Industry Group/Deloitte CEO survey released today, Business Regulation, points to the high and rising cost of complying with regulation for Australian businesses. 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. It requires urgent government attention.

According to the survey of 322 CEOs from the manufacturing, services and construction sectors, the average business spends almost four percent 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.

Other key findings include:

  • 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.

Australian Industry Group (Ai Group) Chief Executive, Heather Ridout, said: "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. This is a major concern for business productivity and competitiveness.

"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.

"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, " Mrs Ridout said.

Deloitte Managing Partner, NSW, John Meacock, said: "While it is clear from this survey that regulatory compliance costs remain an issue for business, regulatory change can also present opportunities for business to get ahead of the game. Managing future changes with maximum efficiency should also be accompanied by strategies to take advantage of regulatory change. A strong case in point is the carbon pricing scheme and how organisations can strategically position themselves to take advantage of the changes."

Survey highlights:

  • The average business spends close to 4 per cent of total annual expenditures on complying with regulation.
  • Close to 70 per cent of respondents have experienced a rise in compliance costs over the past three years and around 75 per cent expect a rise in compliance costs in the next three years.
  • Around 80% of total compliance costs are in the form of payments made to external service providers (accountants, lawyers etc).
  • Two-thirds of respondents report that waiting for regulatory decisions is associated with the greatest costs.
  • Around 27 per cent of respondents indicated there are significant regulatory barriers to changing workplace practices.
  • Occupational health and safety (OHS) and workers compensation schemes require the most compliance time according to 15 per cent of respondents.
  •  Regulations associated with importing and exporting activities are the most time consuming compliance activity for around 10 per cent of businesses.
  • 9.2% of respondents said that compliance with other regulations associated with employing workers (superannuation, monitoring award changes) is highly time consuming.
  •  Larger (100 employees or more) businesses spend relatively more time (27.2 hours per week) compared to medium (16.8 hours) or small businesses (7.3 hours) on compliance related activities.
  • The rise in compliance costs over the last three years has been driven by greater demands relating to OHS, environment protection and taxation.
  • 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.
  • Businesses experience the greatest amount of red tape (excessive paperwork, delays, difficulty accessing information) in dealing with industrial relations and workers compensation regulatory agencies.
  • Close to 20 per cent of businesses believe there should be some consolidation of information provided to regulatory agencies, including:
    - Workers compensation and workplace incident reports to State and national OHS regulators.
    - Payroll tax across different States.
    - Business activity statements.
  • Around one-fifth of respondents believe regulatory information is difficult to find or not available.

Media enquiries

Anthony Melville
Ai Group
Tel: +61 2 6233 0700
Mob: +61 4 1919 0347

Vessa Playfair
Deloitte
Tel: +61 2 9322 7576
Mob: +61 4 1926 7676

The full survey can be found at http://www.aigroup.com.au/policy/reports

Last Updated: 

Contacts

Name:
Vessa Playfair
Company:
Deloitte Australia
Job Title:
Head of Corporate Affairs
Phone:
Tel: +61 2 9322 7576, Mobile: +61 4 1926 7676
Email
vplayfair@deloitte.com.au
Name:
Anthony Melville
Company:
Australian Industry Group
Job Title:
Director
Phone:
Tel: +61 2 6233 0700, Mobile: +61 419 190 347
Email
anthony.melville@aigroup.asn.au

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