By Steve Burrell
AUSTRALIA needs to become a seamless economy by replacing the costly and inefficient patchwork of regulatory regimes that now confronts businesses across the country with a consistent national system.
And that fundamental remaking of the regulatory fabric needs to be done in the next three years.
This is the strong message being sent by corporate Australia to state governments and the Rudd regime in Canberra in a major report published yesterday.
The Business Council of Australia report calls on the leaders, via the Council of Australia Governments, to speed up reform to harmonise regulations across the country, so that by the end of 2010 businesses will face a consistent environment wherever they operate.
As a first step, this means completing by the end of next year harmonisation in the 10 so-called hot spots of inconsistent and overlapping business red tape - such as occupational health and safety, building regulation and product safety - which were targeted for reform by COAG two years ago but on which there has so far been no real progress.
And the business council says that if the states cannot agree on fixing these hot spots by the end of this year, the Federal Government should step in to create national regulatory schemes, allowing businesses to "opt in", by the end of next year - in much the same way that Kevin Rudd has warned the states that he will move to take over the nation's public hospitals by 2010 if the states do not fall into line on reform in that area.
Into the future, it also wants COAG to implement processes to ensure the economy remains seamless by implementing better systems of creating and assessing business regulation.
Rudd has already made cutting back the maze of business regulation and red tape, at Commonwealth and state level, one of his top policy priorities, and for good reason.
As the business council paper points out, Australia is an economy subject to no less than nine regulatory regimes, with eight states and territories each seeking to regulate in their own way, overlaid - and in some cases duplicated by - national regulation imposed at the Commonwealth level.
"From a business perspective, Australia is not one market; it is nine," the business council says.
"Unnecessarily complex business regulation means that businesses continue to face needless delays, increased compliance costs, more expensive inputs and difficulties in transferring qualified staff to the places they are most needed."
This problem is not limited to a few big businesses.
Last financial year more than 31,700 Australian businesses were operating in more than one state or territory.
More than 4300 operated in every state and territory, meaning they dealt with nine different regulatory regimes.
And it is a growing problem. Since 2003 the number of businesses operating in every state and territory has increased by more than 70 per cent.
All these businesses face a multiplicity of regulatory regimes and huge overlap, both between states and between state and Commonwealth jurisdictions.
Whether it is business taxation of various forms, occupational health and safety rules, workers compensation, product standards, trade practices legislation, food laws and regulation, shop trading hours, road transport regulation or many other areas, businesses face myriad different demands, extra paperwork and record keeping, multiple licence, inspection and audit fees and other extra costs. This effects individual companies and the economy as a whole.
In the occupational health and safety area, for example, Optus has estimated that if it received a single national self-insurance licence it would save up to $2 million of its $6 million annual workers' compensation costs. Insurance Australia Group estimated that the existence of multiple schemes added $10.1 million to the cost of setting up a single national IT platform and that having to comply with multiple jurisdictions adds about $1.7 million to IT costs annually.
At the aggregate level the Productivity Commission has estimated the economy-wide benefit in reducing compliance costs at $8 billion a year, or 0.8 per cent of GDP. Take in the wider efficiency gains resulting from regulatory reform, which alone could be more than the direct savings from reduced compliance costs, and the total economic benefits would be more than $16 billion, or 1.6 per cent of GDP.
Overcoming what the Treasury secretary, Ken Henry, has called Australia's "stubborn parochialism" when it comes to regulatory reform by creating a seamless economy is also critical in lifting long-term productive capacity.
This why harmonising - and reducing - regulation is a crucial part of the Federal Government's economic policy task and a key element of its agenda for increasing national productivity. It is also why making COAG, and the federation, work better is so important and why, if necessary, Rudd has to knock state heads together or come in over the top.
What is needed is essentially what the business council proposes: a national reform plan with a clear, rapid timetable for harmonising regulations affecting businesses operating across state boundaries, improving the mechanisms used by states to create new regulations and assess existing ones and for accelerating the reduction of their red tape.
And with a new government in Canberra, and a year before any state government needs to go to a election, the timing is right. It will have its opponents, but a lot of the objections are straw men.
As the business council points out, creating a seamless economy is not about abolishing the states, abolishing all regulation, undermining the capacity of states to raise revenue, or moving responsibility for all regulation to the federal government.
The states have a vital role, which is why Rudd correctly identifies this as a big issue for COAG, inextricably linked to his broader reform of federal relations.
But in the end it must be national in focus and led from the national level.
Business has thrown down the gauntlet. Rudd, and his ministers for deregulation, Lindsay Tanner and Craig Emerson, should pick it up.