Australia’s businesses are grappling with an escalating compliance burden, costing the economy an estimated $160 billion annually, which equates to 5.8% of GDP. A report from the Australian Institute of Company Directors (AICD) indicates that in 2024, businesses employed approximately 52,000 workers solely for regulatory compliance. This figure surpasses the number of people working in the entire coal mining sector, Australia’s second-largest export industry.
The analysis, conducted by Mandala Partners, highlights a decade’s worth of regulatory growth that has created significant challenges for businesses. The proportion of time boards dedicate to compliance has surged from 23% to 55% over the last ten years. The report suggests that the complexity of federal regulations has tripled since 2000, creating what AICD chief executive Mark Rigotti describes as an unwieldy system.
Striving for Regulatory Reform
Rigotti emphasizes that the focus should not be on diminishing protections but on refining the regulatory framework to better serve businesses. “When more than half of board time is consumed by compliance and regulatory oversight, we know we have got the balance wrong,” he stated. The report underscores that the accumulation of regulations, often poorly conceived, is impeding business investment and productivity.
Australia’s productivity growth has declined to its lowest level in over 60 years, a trend that is concerning for long-term living standards. In a related report, the independent Productivity Commission noted that a “pile-up” of regulations hampers business dynamism.
Treasurer Jim Chalmers is under pressure to address these issues. He has committed to improving business conditions by reducing regulatory blockages, including measures such as slashing tariffs and streamlining foreign investment procedures. “We’ve already got a big agenda to ease the burden on businesses, cut red tape and build more homes but we’re keen to do more where we can,” Chalmers asserted.
Recommendations for Change
The AICD’s report recommends that the government aim to decrease the regulatory burden by 25% by 2030. It calls for a systematic process to assess the implications of new regulations on compliance costs. One significant proposal involves raising the threshold for companies required to submit audited financial reports from $50 million in revenue and $25 million in assets to $100 million in revenue and $50 million in assets. This change could potentially yield compliance savings of around $1.7 billion over four years and relieve approximately 1,500 firms from climate reporting obligations.
Rigotti concludes with a call for fundamental changes in how regulations are managed, stressing the need to abandon a “set and forget” approach that allows regulations to accumulate unchecked. The AICD’s insights shed light on the pressing need for reform in Australia’s regulatory landscape to enhance business efficiency and restore international competitiveness.
