Regulation and its Review 2004-05

Annual report series

Regulation and its Review 2004-05 was released on 31 October 2005. The report forms part of the Commission's annual report series and meets its obligation to report annually on compliance by Australian Government departments and agencies with the Government's Regulation Impact Statement (RIS) requirements.

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A well functioning regulatory system is an essential component of modern society. The Australian Government's Regulation Impact Statement (RIS) process contributes to this objective by helping to ensure that proposed new regulations that impact on business are warranted and efficient.

Overall, the compliance of departments and agencies in 2004 05 with the RIS requirements at the decision-making stage for regulation was lower than in some previous years:

RISs were prepared for only 84 per cent of the 85 regulatory proposals that required them. Of those prepared, three were assessed as inadequate, giving an overall compliance rate of 80 per cent (compared with 92 per cent in 2003 04 and 81 per cent in 2002 03).
Of the 19 Australian Government departments and agencies that were required to prepare RISs in 2004 05, 10 were fully compliant (compared with 18 of 24 in 2003 04 and 12 of 23 in 2002 03).

In 2004 05, compliance by Ministerial Councils and national standard-setting bodies with the Council of Australian Governments' RIS requirements at the decision making stage was 88 per cent (compared with 88 per cent in 2003 04).

Most OECD countries and other Australian jurisdictions also use RIS processes. Several of these jurisdictions have based — or are considering basing — their RIS processes on those used by the Australian Government, which are highly regarded internationally.

Notwithstanding this, there have been growing concerns from Australian business about rising regulatory complexity and compliance burdens. In part, additional regulation and associated burdens are the product of a more sophisticated and diverse economy and society, with growing demands on government. Nevertheless, it is also clear that the quality of regulations could be improved and that more can be done to promote this.

There is broad agreement that adherence to RIS process can and should be improved — including, for example, by regulators better integrating the preparation of RISs into the policy development process, increasing their commitment to consultation with stakeholders and undertaking more robust analysis of policy options.

In 2005 06, the ORR intends to further raise the minimum adequacy standards for RISs, with a particular focus on improving the standard of analysis of costs and benefits, and of compliance costs for business. The ORR will also enhance its RIS training and explore the scope to make greater use of information technology to facilitate interaction with regulators.

There have been growing concerns from Australian business about rising regulatory complexity and compliance burdens. Notwithstanding previous regulatory reforms, it is clear that more can be done to improve the quality of regulations. This is a key theme in the Productivity Commission's report Regulation and its Review 2004-05.

The Regulation Impact Statement (RIS) process seeks to ensure that proposed new regulations that impact on business are both justified and cost effective.

Compliance of Australian Government departments and agencies with the RIS requirements in 2004-05 was lower than in some previous years (80 per cent, compared with 92 per cent in 2003 04 and 81 per cent in 2002 03). Of the 19 Australian Government departments and agencies that were required to prepare RISs in 2004 05, only 10 were fully compliant.

Productivity Commission Chairman, Gary Banks, said 'The drop in compliance last year is disappointing. Only a fraction of the 2500 or so regulations made in that year were required to have a regulation impact statement. And the costs to departments and agencies of doing so are not great, especially where best practice is routinely followed.'

The Commission argues that greater adherence to the spirit as well as the letter of the RIS requirements, would help to avoid costly regulation for business. Regulatory departments and agencies need to integrate the preparation of RISs into the policy development process, increase their commitment to consultation with stakeholders and undertake more robust analysis of the costs and benefits of policy options.

The report also contains information on compliance by Ministerial Councils and national standard-setting bodies with the Council of Australian Government's (COAG's) RIS requirements. The overall compliance rate was 88 percent, the same as the previous year.

The report meets the Productivity Commission's obligation to report annually on compliance with the Australian Government's requirements for the review and reform of regulations. Regulation Impact Statements are intended to help inform decision makers about the consequences of proposed regulatory actions, so that resulting regulation can achieve its objectives without placing unnecessary burdens and costs on business and the community.

The Commission's Office of Regulation Review is responsible for advising departments and agencies about the Government's regulatory best practice requirements and independently monitoring their compliance.

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