Assessing the success of any red tape reduction efforts should begin by understanding the current scope and extent of Australia’s red tape problem.
Back in 2014 the Commonwealth attempted to determine the cost of red tape. After asking portfolios to estimate compliance costs the verdict was $65 billion each year.
Recently the Institute of Public Affairs estimated the cost of red tape at more than double that number: $176 billion each year.
The discrepancy here demonstrates the ambiguity of estimating the cost of red tape.
While our estimate overcomes some of problems by using a ‘top-down’ approach—utilising the World Bank’s ‘regulatory quality index’ and its relationship to real GDP per capita—rather than portfolio costings, an alternate measure is clearly needed.
One option is to benchmark red tape reduction on the number of ‘regulatory requirements’ imposed by the portfolio on individuals and businesses.
Therefore, we recommend the next Australian government requires each portfolio to count the number of times an action or step is required from the public.
Adopting this benchmark would provide many benefits over the current method: it is more easily updated, less prone to bias, and is more transparent than portfolio regulatory costings.
When British Columbia, Canada, used this approach the province then experienced a remarkable 43 per cent fall in ‘regulatory requirements’.
Implementing this initiative will help to ease the some $176 billion lost each year due to red tape.