The Australian business landscape is grappling with an overwhelming burden of regulatory red tape, costing the economy an estimated $160 billion, according to a report released by the Australian Institute of Company Directors (AICD). The report highlights that in 2024, businesses employed approximately 52,000 workers solely to navigate compliance requirements, surpassing the total number of employees in the country’s coal mining sector, which is Australia’s second-largest export industry.
The analysis, conducted by Mandala Partners, reveals that the financial impact of regulatory compliance has escalated from 4.2 per cent of GDP in 2013 to 5.8 per cent in 2024. This increase underscores the challenges that Treasurer Jim Chalmers faces as he aims to enhance productivity and reduce unnecessary regulation.
Regulatory Burden Impacts Productivity
AICD Chief Executive Mark Rigotti warned that Australia risks losing its international competitiveness without significant regulatory reform. The report notes that the volume of federal regulations has tripled since the year 2000, and the time boards dedicate to compliance has risen dramatically—from 23 per cent to 55 per cent over the past decade.
“This isn’t about weakening protections or cutting corners. It’s about making our regulatory system fit for purpose,” Rigotti stated. He emphasized the need for a balanced approach, noting that when compliance consumes more than half of board time, it indicates a fundamental misalignment in regulatory priorities.
The report also echoes findings from the Productivity Commission, which identified that poorly designed regulations and the accumulation of multiple regulations impede business investment. Such barriers have contributed to Australia’s productivity growth plummeting to its lowest level in over 60 years, directly affecting living standards.
Proposed Changes to Alleviate Compliance Costs
In response to these findings, Chalmers expressed a commitment to addressing the regulatory bottlenecks. “Whether it’s slashing tariffs, streamlining and strengthening our foreign investment regime, or advancing merger reforms, we are actively working to improve regulation and expedite approval processes,” he stated.
The AICD has called for the regulatory burden to be reduced by 25 per cent by 2030. To facilitate this, the report recommends a more thorough assessment process for new regulations to evaluate their impact on compliance costs.
Among the specific proposals is raising the threshold for companies required to file audited financial reports with the corporate regulator from $50 million in revenue and $25 million in assets to $100 million in revenue and $50 million in assets. Implementing this change could yield approximately $1.7 billion in compliance savings over four years, relieving around 1,500 firms from climate reporting obligations.
Rigotti concluded by urging a shift away from a “set and forget” approach to regulation, which inadvertently allows for unchecked regulatory accumulation. Addressing Australia’s complex regulatory landscape is crucial for enhancing its economic vitality and ensuring that businesses can thrive in a competitive global environment.
