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Performance benchmarking of Australian business regulation: Feasibility

Feasability report

Released 06 / 03 / 2007

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  • Key points
  • Media release
  • Contents

While much business regulation is essential, it can involve unnecessary compliance costs. Such burdens are compounded for firms operating across Australia.

Benchmarking compliance burdens could help identify where costs could be reduced, and complement other regulatory reform initiatives.

Such benchmarking is technically feasible and could yield significant benefits. However, there are methodological complexities and uncertainties about data, requiring a careful, staged approach to implementation.

  • Benchmarking across jurisdictions would need to be confined to areas of regulation with comparable objectives and benefits, and rely mainly on indirect indicators that would not be definitive about performance gaps.

Benchmarking compliance costs of key regulatory areas should include the costs of:

  • becoming and being a business, arising from one-off activities such as licensing and ongoing activities such as meeting OHS standards;
  • the delays, uncertainties and compliance activities associated with obtaining government approvals in doing business; and
  • regulatory duplication and inconsistencies in doing business interstate.

In addition, benchmarking the quality and quantity of regulation across jurisdictions and over time (including for specific business categories) would provide complementary insights into cumulative burdens and systemic problems.

It would be desirable to follow a limited and targeted program over the first three years, that would allow 'learning by doing'.

  • The first year would focus on benchmarking the quantity and quality of regulation, as well as compliance costs for a single area of regulation, and developing data sets for other areas. Progressively more regulation would be benchmarked in subsequent years.

Based on the likely significance of compliance burdens and other criteria, suggested priorities for inclusion in the initial three year program are OHS; land development assessments; environmental approvals; stamp duty and payroll tax; business registration; financial services regulation; and food safety.

Data for many indicators is obtainable from published sources and governments, but face-to-face surveys of individual businesses would also be needed.

  • Survey costs, including for business, can be reduced by targeting 'reference businesses' with appropriate attributes.

The cooperation and support of governments and business - in advising on indicators and supplying comparable data - would be crucial to the success of any regulatory benchmarking program. Advisory panels would facilitate necessary interaction.

Benchmarking regulatory compliance burdens across all jurisdictions in Australia is technically feasible and could yield significant benefits, according to a report released by the Productivity Commission - Performance Benchmarking of Australian Business Regulation. Benchmarking can help shed light on where and how regulatory burdens might be reduced, while still meeting regulatory objectives.

The Commission has proposed a program to benchmark compliance costs involved in establishing and running businesses both within and across jurisdictions. Seven areas of regulation have been identified as priorities for the first three years, including business registrations, occupational health and safety, land development assessments and environmental approvals.

As well as benchmarking regulatory compliance costs, the Commission intends benchmarking the quantity and quality of regulation. It is argued that this would help to identify systemic problems that can result in regulation that is poorly designed, administered or enforced.

Productivity Commission Chairman, Gary Banks, observed: ‘Benchmarking regulatory regimes is doable and would complement other efforts to achieve cost-effective regulations across Australia's federation. However, it presents some challenges and will require adequate resourcing and the active cooperation of governments and business alike.’

The Productivity Commission's report responds to a request from the Council of Australian Governments' (COAG) that it assess the feasibility of regulatory benchmarking and put forward options. Subject to COAG's agreement, the Productivity Commission would proceed to the next stage of collecting data and reporting on performance indicators.

Cover, Copyright, Terms of reference, Contents, Abbreviations, Glossary, Key points, Overview

1 What is this study about?
1.1 Background
1.2 Scope of the study
1.3 Approach to the study
1.4 Conduct of the study
1.5 Report outline

2 The benchmarking framework
2.1 Why benchmark regulatory burdens?
2.2 What benchmarking could be done?
2.3 Getting the best value out of benchmarking

3 What can be learnt from other studies?
3.1 Self-enumeration surveys
3.2 Informant surveys
3.3 Personal interviewing surveys
3.4 Summing up on lessons from other studies

4 Becoming and being a business
4.1 Industry concerns - which regulations?
4.2 Identifying unnecessary burdens
4.3 Measuring compliance burdens - possible indicators
4.4 Measuring indicators - is benchmarking feasible?
4.5 What are the main reporting caveats?

5 Doing business - approval processes
5.1 Industry concerns - which regulations?
5.2 Identifying unnecessary burdens
5.3 Measuring compliance burdens - possible indicators
5.4 Measuring indicators - is benchmarking feasible?
5.5 What are the main reporting caveats?

6 Doing business interstate
6.1 Industry concerns - which regulations?
6.2 Identifying unnecessary burdens
6.3 Measuring compliance burdens - possible indicators
6.4 Measuring indicators - is benchmarking feasible?
6.5 Reporting caveats

7 Benchmarking the quantity and quality of regulation
7.1 Benchmarking the total stock of regulation
7.2 Benchmarking the burden on a business type
7.3 Benchmarking the quality of regulatory design, administration and enforcement
7.4 Government initiatives to reduce regulatory burden
7.5 Measuring indicators - is benchmarking feasible?
7.6 What are the main reporting caveats?

8 A proposed benchmarking program
8.1 The benchmarking framework
8.2 A proposed program
8.3 Implementing the program
8.4 The Commission's proposals in brief

Appendix A Public consultation

Appendix B Theory and practice of composite performance indexes

Appendix C Case study 1 - restaurant and cafe licensing

Appendix D Case study 2 - environmental approvals

Appendix E Case study 3 - personal property security regulation