$160 billion and counting: The cost of Commonwealth regulatory complexity

Compliance with federal regulations costs Australia $160 billion, or around 5.8 per cent of GDP in 2024. The burden of compliance has increased since the last time Australia conducted a regulatory stocktake in 2013, when compliance was determined to cost $65 billion or 4.2 per cent of GDP. This does not include the cost of compliance with state and local government regulations, which would add additional burden.

Australia’s productivity is lower than peer countries, with a simultaneously higher regulatory burden. Productivity growth has reached its lowest point in 60 years. Australia’s productivity is much lower and our regulatory burden is higher than the OECD average. Addressing Australia’s growing regulatory burden is one lever in improving the nation’s productivity. Australia’s weak productivity growth is in part attributed to the growing regulatory burden facing our businesses. More resources being directed towards regulation drives up costs and directs effort away from productivity enhancing activities.

The regulatory landscape in Australia has expanded and become more complex in recent decades. More regulations are being added for businesses to comply with, with double the number of federal regulations and triple the pages since 2000.

Businesses are diverting resources towards compliance in response to an expanding regulatory burden. Compliance roles have doubled since 2010, shifting labour costs towards compliance and growing faster than overall employment. Across the same time period, legal spending and board time spent on compliance have both doubled.

Spending on compliance indirectly hampers business investment. A 0.1 per cent increase in the share of compliance workers, similar to the change over the past decade, is associated with a $10.4 billion reduction in investment.

Regulatory reform is urgently needed, and it requires addressing the existing stock of regulation and the flow of new regulation.

To address existing regulation, AICD recommends:

• Committing to a 25 per cent reduction in regulatory costs by 2030
• Lifting the thresholds for large proprietary companies and Group 3 climate reporting entities, which could save $1.7 billion over four years
• Adopting in full the Australian Law Reform Commission’s recommendations

To address the flow of new regulation, AICD recommends:

• Strengthening scrutiny of new regulation
• Introducing systematic post-implementation reviews
• Reinstating an independent corporate law advisory body

Read the full report here.