Red tape excess holds back State's progress

Bookmark and Share Economics & Deregulation, Project Western Australia and States Policy Unit | Mikayla Novak
The West Australian 18th June, 2009

The Western Australian economy might be reeling from the impact of the global financial crisis and retreating commodities boom, but not everything is out of the government's hands. One sure-fire method by which the Barnett government could shore up the WA economy would be to tackle the state's massive red tape and over-regulation problem.

Every year, the Western Australian parliamentarians and bureaucrats add more and more economic, social, and environmental burdens upon businesses and individuals.

In the 1960s, the Western Australian government was passing an average 750 pages of legislation every year. This decade, that average has increased to 2,500 pages.

This dramatic increase in legislative activity is not totally unique. All states have passed an unprecedented volume of legislation since the turn of the century. But Western Australia has increased the most - state politicians are passing an average of 157 pages more per year than the year before.

That's a lot of rules. The sheer volume of regulation WA businesses have to monitor and comply with is one of the state's largest problems.

For example, the average farm - from small family‑owned farms to large corporate behemoths - has to comply with at least 30 pieces of state legislation and 86 separate pieces of subordinate legislation. And that's before we account for all the federal and local government laws.

Unfortunately, it's no surprise that the state has developed a certain reputation for regulatory excess.

In survey done of resource executives around the world, Western Australia was rated as the most risky investment destination in Australia. Given the choice, resource firms would prefer to invest their money in other states - hardly the sort of situation you'd want your state to be in as the economy plummets.

The Western Australian Chamber of Commerce and Industry has estimated that regulation costs the state economy the $2.1 billion a year - the equivalent of 2 per cent of gross state product.

Over-regulation doesn't only have financial costs. Shop trading hours restrictions don't just cost the WA economy, they reduce quality of life - holding Perth's social and retail scene back from its otherwise abundant potential. Red tape surrounding the 2006 reforms to liquor licensing have stifled the development of Perth's nightlife, which has only been further stifled by the restrictive taxi licensing that makes it almost impossible to catch a cab home.

So what can be done about WA's over-regulation problem? There is a broad consensus on both sides of politics that the state needs to cut back on red tape, and the Barnett government's announcement earlier this of much needed regulatory reform is welcome. From now on, every new regulation proposed will have to be assessed to see whether it is excessively costly or could have significant unintended consequences.

These reforms are a good start, but cutting back the dense thickets of regulation will require somewhat more. An advantage of lagging behind much of the wave of regulatory reform over the last decade is that, by now, we have a fairly good idea at what works to reduce regulation - and what doesn't. WA needs an independent, dedicated agency to monitor to progress of regulatory reform, benchmark government outcomes and undertake inquiries into regulatory issues, like the Victorian Competition and Efficiency Commission, or the Dutch Advisory Board on Administrative Burdens, two models of independent agencies which Western Australia could emulate.

But the biggest change will have to be cultural. Too many of the regulations holding back Western Australia's economy support vested interests at the expense of consumers. The hairdresser's licencing board even states on its website that the compulsory hairdressers licence is intended to prevent "unqualified people from opening a salon next to you and practising as a hairdresser in an attempt to impact on your established clientele." Protecting hairdressers from competitive pressure keeps prices high and availability low.

Regulations should benefit, not punish consumers. If Western Australia is going to come out of the financial crisis stronger, the Barnett government will have to tackle the state's over-regulation problem.

Julie Novak is a Research Fellow with the Institute of Public Affairs. "Over-ruled: How excessive regulation and legislation is holding back Western Australia", will be released by the Institute of Public Affairs this week.

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