Daniel Mulino:
Thanks, Andrew, for that very generous introduction. Can I begin by acknowledging the Traditional Owners of the land on which we meet and pay respects to elders past, present and emerging. Can I acknowledge Andrew, Andrew McKellar and Lyall Gorman and ACCI and all of the work that it does, and I'll comment a bit later on the significant contribution that ACCI has made over a long period of time, including at the 3-day Economic Reform Roundtable.
Can I acknowledge that there are a number of parliamentary colleagues who have already visited this event; Tim Wilson, Bridget McKenzie, and if there are others who I haven't seen I acknowledge you also. And I think it's good to have seen people from a number of parties here because I think in relation to the important themes that we're going to be talking about this morning, there are many areas of consensus.
One of the examples I'm going to touch on later on, the digital asset custodianship bill, which was passed last night, is an important example of regulation that is dealing with an emerging issue. It was passed with the support of all the major parties last night.
So there are areas where we're working together on better‑designed regulation. There are also some areas of contestation when it comes to regulation, and I mean that's appropriate in any way area of complex policy, but I do want to acknowledge that it's very good to have seen senior members of the Opposition here.
Can I also acknowledge all of the other members of ACCI here today. I was at an ACCI event in Melbourne not long ago, and it reinforces at each of the events I go to how wide‑ranging a membership it is. And a lot of the members who are here today contribute to the debates that I'm involved with in their own right as well. And so, look, there's a lot of wisdom in this room and I certainly appreciate the way in which ACCI in particular, but also all of the different members in this room contribute to economic debates in my portfolio and beyond.
It's great to be here for the launch of a really important report. 'Path to Prosperity' I think looks at a very important aspect of our nation's productivity debate in a rigorous and thoughtful and holistic way. I'm not necessarily here to announce that every single recommendation is now official government policy, but I think it really does make a valuable contribution.
I think part of that contribution is to take a step back and to ask about the role that regulation plays in our economy as a whole, and then also to look at a few of the key dimensions of the way in which regulation is developed and implemented, and from an economic analysis and productivity lens. So look, there's a lot of really worthwhile analysis in that report.
To pick up on Andrew's point, productivity is now I think a key lens for the government across a whole range of portfolios. It is really important and telling that it was one of the key themes that the Treasurer examined in his post‑election public appearances. I think it's appropriate that it be a focus of the government's attention, and the attention of this building, because it is such a key underpinning of our long‑term prosperity.
I can't remember who it was, it might be Krugman, but it was a very prominent genius economist who said that productivity isn't everything, but in the long run it's almost everything. And I think that's an area where economists will all pretty much agree, that when you're looking at long‑term growth, when you're looking at the long‑term drivers of per capita GDP and per capita welfare, productivity numbers are really the main game and arguably just about the only game. So it is critical that we lift the speed limit, as Andrew said, of our economy so that we can achieve higher growth.
And it's not just higher growth in terms of per capita GDP numbers in dollar terms. I believe productivity growth, it grows our opportunity set. And if it grows, our opportunity set in a whole range of dimensions, it allows us to strengthen our social insurance, it allows us to strengthen what we as a society do to protect our environment. I think productivity growth underpins our society's capacity on all fronts. And so I do think it needs to be a centrepiece.
It was a key focus of the 3 day Economic Reform Roundtable, and I think the fact that we brought together key thinkers across a whole range of Australian sectors for 3 days, and worked together in the Cabinet room. It was a little insight into ERC for people who haven't worked in government before, the vitamin D deficiency that often comes with policy development. But I think the fact that that was such a focal point demonstrates that productivity really is at the heart of the government's agenda.
Andrew was there for the whole of that 3 days, and others in this room contributed in significant ways. I think that it was also telling that of that 3 days regulation was a key theme. There was a whole day dedicated explicitly to regulation, and as I'm going to touch on in my comments, some of the key outcomes of that 3-day Economic Reform Roundtable, more momentum for the resolution of the EPBC Act passage, the NCC Code being frozen for 2 years, and others, regulation was a key theme of the 3 days and moving forward on a range of important regulatory issues I would argue are some of the key outcomes of that 3-day Economic Reform Roundtable.
So the themes in this report I think are at the heart of the economic reform agenda and that's as it should be.
Now given that this report usefully takes a step back, I just wanted to make a few of my own observations about regulation at a high level, if you'll indulge me, and I think these are very aligned with the analysis in the report.
I do think it's important when we think about regulation to think about the primary goal of regulation, because of course most regulation is there for an important reason, whether it be consumer safety, whether it be consumer protection in a whole range of areas where they are purchasing goods or services, or whether it be market confidence. And there are many important public policy goals that regulation seeks to achieve, and indeed, many of those are pro‑productivity. So in my own portfolio, where regulation of markets is well designed, it can create confidence in markets, it can create a greater propensity to invest, it can be productivity‑enhancing.
So I just think it's important to step back and have a look at what it is that we're trying to achieve with productivity. There are often important policy goals, some of which are very aligned and complementary to productivity.
But I mean, firstly, having said that, it's important that we are always very clear in what the policy objective is, and I think that's usually the case but it's often not always as easy as we imagine to very clearly define that policy objective.
So I do think it's always important to make sure that we are very clear in what it is that we are seeking to achieve. And that sounds like the obvious, but I don't think it's always as easy as we might imagine to clearly define what it is we're seeking to achieve. Because if we are absolutely clear in the primary policy goal, then I think it's more likely that our regulation will be well designed.
And the second point I would make is that while those primary policy goals are very important, to the point that Andrew made and this report makes, there are occasions where even though regulation is aiming to achieve worthwhile policy goals, it is not well designed, it can have negative side effects. It can have effects which run counter to productivity. So I think that's important to acknowledge that there can be trade‑offs in the design and implementation of regulation.
So I think those primary policy goals are extremely important, but it is important to acknowledge that as worthwhile as they are, we do need to bear in mind that occasionally regulation can create negative consequences as well.
The second aspect of regulation that I wanted to touch on, and again which I think is touched on in this report, something which is very prominent in my portfolio, is the issue of coordination and the notion that there are many worthwhile pieces of regulation being implemented often in parallel, which then often interact with each other in ways that were not necessarily thought through in each of the individual silos. That's a reflection of the complexity of government, it's a reflection of the complexity of our society, but it is something I think that we need to acknowledge and be aware of.
Again, I don't want to constantly come back to financial services, but it's something which I'm all too aware of in my day‑to‑day job, and I think it does bear out some of these lessons.
But the Regulatory Initiatives Grid was something which came out of a major inquiry into competition and economic dynamism in the previous term, and that's something which forces government to basically publish and acknowledge all of the different strands of regulation across government, but also all the different regulators in the financial services sector. It's a very useful tool which had been in place in the UK and some other jurisdictions.
But what it stresses to me is that there is often, especially in the more complex areas of regulation, a coordination challenge which we need to think through.
Now the Regulatory Initiatives Grid in financial services I think isn't the final answer, it's a work in progress. But I think even putting out into the public realm all the different pieces of regulation that have been implemented or are in the pipeline has been a very useful initiative. And that was something which all stakeholders in financial services, large and small and across all the different sectors, called for.
The other thing I would say is that there is in a sense an operational dimension to this as well. So what I just talked about in a sense was the need for coordination at the implementation of regulation, but I would say there's also an operational side to it, and again this is touched on in some of the examples in the report. This goes to issues such as how do all the different regulators that touch on a particular entity coordinate in their day‑to‑day operations? And this covers themes such as if they're all collecting very similar data, are there ways in which we might, for example, be able to align those asks so that there's a tell it once.
So, this again raises this issue that there might be very valid reasons why each of the regulators are asking for each of the datasets they're asking for. But if they're asking for it in a staggered way and each of the companies has to then regenerate that data, or if they're asking for extremely similar datasets but with slightly different definitions or slightly different parameters, then it can add a great deal of red tape.
Again, this is an issue in financial services where there are multiple regulators, but it's an issue I know across many, many areas of government.
Now this is more difficult to align in practice than it sounds because it requires often lining up independent regulators, it requires IT systems, but it is important work and I'm confident that this is an area where we can actually make some progress in a whole range of areas. It is one of the areas that's been identified in the financial services sector coming out of the 3-day Economic Reform Roundtable and other forums. But I know that this would be advantageous in a range of other areas.
But I just wanted to touch on that second theme of coordination and the fact that for good reason there are often multiple departments or portfolios, and sometimes multiple regulators having an impact on individual businesses. That's often necessary because each of those regulators have their own function, but we do need to be conscious of the impact that can have and the need to line up their work as much as possible.
The third overarching theme I wanted to touch on before getting into a few examples, which I think line up with specific things raised in the report, was what I have characterised as the challenge of changing circumstances or a dynamic environment. And I think we've always had a dynamic environment in our society, but I do feel that things are accelerating and this raises challenges for regulators.
Again, I've split this up into the implementation phase and the operational phase, but if we think about the impact of changing circumstances on the implementation phase. Let me give an example again in my own portfolio.
Buy Now, Pay Later was a new product or service that was being taken up by consumers at a significant rate in the previous term, and that's a good thing. It was a product with new innovative characteristics, and the fact that people were taking it up indicates that there were characteristics of that service which people found very appealing. But there was clearly a potential risk for consumers in some aspects.
And so the challenge for government was how do we design regulation that deals with that risk in a timely way but not in a way that kills off the new service prematurely before its innovation benefits have flowed through. And I raise this not to get into the details of that particular issue but simply to say I think government is increasingly going to face this challenge in a wide range of areas. Where there is innovation, sometimes where there is a risk associated with that innovation, government is going to face the challenge of do we lean in with regulation when we feel there is a risk of consumer harm, for example, or anti-competitive behaviour? But potentially, is there a risk if we lean in too early that we don't yet fully understand what this product or service is? Is there a risk that we don't understand how it's going to flow through the economy?
And so for me I think the sandbox is a really important concept where governments need to think through ways in an increasingly changing environment where we can start off with cautious regulation that is less likely to impede the innovation but is in a targeted way going to deal with the most high‑risk aspects of the environment.
The sandbox is a really important concept that is used in a range of areas in other jurisdictions, such as Singapore and the UK, and I just flag it as an important area of regulation because I think it gives government the option in areas where things are fast‑changing to lean in in a measured and appropriate way.
We are, at the moment, undertaking a major review of our sandbox here in Australia, and I think this is something I'm really keen to work with industry on, because in a rapidly changing world, I think that is particularly important.
AI for me is another example of where we need to probably regulate in certain areas, but I do think we need to be cautious and make sure that we don't do so in a way that impedes what are clearly significant productivity‑enhancing opportunities.
And secondly, what are the operational aspects of changing circumstances, if you will, or a dynamic environment? And again, to revert to my portfolio, the payment system is an area where things are changing so quickly. The market share of wallets, for example, has gone through the roof. Again, a good thing, but it raises questions of should that be considered part of the payment system?
Now when I was Chair of House Economics in the previous term I was engaged in a one‑hour debate with Apple on this which, you know, I felt a bit outgunned I must say, debating with a $6 trillion organisation over the phone to Washington. But look, these are profound and difficult issues.
Again, I don't raise it to get into the issue of whether or not wallets aren't part of the payment system but to say that our regulation of the payment system I think needs to be an architecture which is flexible enough to evolve as the payment system evolves.
And so whether it's the payment system regulation, whether it's the digital asset platforms and tokenised custody platform regulation which passed through the House of Reps last night with bipartisan support and the support of industry. Industry had been calling for that regulation to provide more certainty. We need regulation that is flexible enough to allow for changing circumstances we can't envisage. Legislation takes a long time to develop and pass, and in areas like the payment system, in digital assets, but in many other areas where members in this room work, I believe that our architecture needs to be flexible enough to encompass change in an appropriate way.
So those are just some themes I wanted to touch on, which I think are very aligned with the findings in this report; the importance of regulation, the need to design regulation well and the need to be nimble.
I just wanted to touch on a couple of other issues quickly. Andrew talked about the EPBC Act reforms. For me, this is an example of pro‑productivity regulation reform, which has been very positive and overdue. This was something which I saw coming out of the 3-day Economic Reform Roundtable. This was an area where in that discussion stakeholders who might ordinarily be in different corners came together and were trying to find compromise.
This is an area where, as Andrew said, we'll have to evaluate the progress of what actually occurs over time, but there is real prospect, I believe, to achieve environmental protection in a way which allows for us to build more things more quickly, to have faster decisions and more rigorous decisions.
So I believe there is a real scope for win-win here, and that to me is an example of where in a complex area we can make progress if we all work together, in this building but also with external stakeholders such as the people in this room.
The other one I was going to touch on, which came out of the 3-day Reform Roundtable, was freezing the National Construction Code until 2029, other than essential safety and quality changes. But I just wanted to flag I think this is a very sensible reform because, as Andrew said, we need more supply. But it's an area again where there are trade‑offs. In the discussion around whether we should freeze the NCC, a number of people rightly raised concerns about the fact that if we freeze the NCC for that long, that is going to raise questions over whether we have not enough flexibility to add, for example, changes to the Code that might encompass more resilience to natural disasters or more energy efficiency or whatever else.
This is a classic case of where there are trade‑offs, where we have not just a policy goal but in a sense now competing policy goals. I think on this one we've landed on a sensible compromise, but I think it's a good example of where we do need to acknowledge that often in the design of regulation, there are trade‑offs.
And there's a whole bunch of areas of national competition policy which I think involve regulation, involve cutting red tape, involve national single market. I won't run through all that, but I think they're very important areas that can drive productivity.
There's a range of areas which I think, I won't go through the details, but things like the investor front door, simplifying trade, digitising trade. And then I just wanted to revisit this issue which I've touched on which is the tell us once. I think this is an issue which is really relevant across government, across the different levels of government. I do feel that there is a lot of scope for progress, where across all the different arms of government, we can make it easier for organisations to deal with government once.
Interestingly, that's also the approach we're trying to take with citizens. We're trying to make it easier for citizens to deal with government by telling their story once, by dealing with one person. But also that's what we're asking a lot of big companies to do. When I have been interacting with companies, whether they be banks or insurers or whatever, often the discussion is around how they can interact with their consumers and clients in a way where they're dealing with them, telling their story once.
So I just raise that because I actually feel like this is a theme which is prominent in many different guises, but I think it lies at the heart of a lot of the practical changes we can make to regulation. I think that it's a way in which we can reduce costs in a material way.
So I just wanted to finish by saying that this is a really important contribution. I do think regulation is a very complex, multifaceted piece of policy discussion because it reflects the complexity of government interaction with society and the economy, but it is a first‑order issue, it is a first‑order driver of productivity growth. It is a real opportunity for us not just to drive productivity growth, but I think to also help achieve those multifaceted primary policy goals of better outcomes for consumers with safety and protection, of confidence in markets.
I look forward to working with ACCI and all the members in this room over the course of this term, and hopefully beyond in progressing this agenda. Thank you.
[Applause]
Andrew McKellar:
Thanks, Daniel. I think some good comprehensive perspectives there, so really I think helping us to flesh out that agenda that we've been talking about.
So just a chance to have maybe a I know you've got to dash for another appointment shortly, and we want to get you away on time but just the chance to probably touch on 2 or 3 quick questions to draw out a little bit more detail on some of those points.
I guess the first one that comes to my mind, so we rolled the clock back to August last year, the Economic Reform Roundtable, I guess since then one of the key things we've seen is we had the Productivity Commission deliver its Five Pillars Reports at the end of last year to government, and there's a huge wealth of I think recommendations, perspectives, a detailed analysis in those reports. I mean there are some things that business would be very sceptical about right off the bat, you know, recommendations around net cash flow taxes I'm not sure have really hit the mark, but we could debate that in more detail.
But I guess listening to the Reserve Bank Governor earlier this week, Michele Bullock, she was saying, 'Well, you know, I'm not the Productivity Czar, that's with the Chair of the Productivity Commission. They've delivered these Five Pillars Reports'.
From government's point of view now, and I'm sure you're looking at this, how do you sift through that? Are there particular things that you can see that come out of those reviews now that are potentially quick wins or that should be put to the top of the agenda? Really how does government take that huge resource and start to act on that agenda that the Commission's provided to government?
Mulino:
Yeah, thanks Andrew. And look, I would just say I think Michele Bullock, I think, is right in saying that the RBA is not the organisation to make detailed recommendations on productivity, but I think she's also been very usefully flagging that we need to lift the speed limit of the economy. So I think that her contribution on that front has been very useful. And it's true, the productivity growth has slowed, and that's a multi‑decade problem, and we do need to turn that around.
I think the Productivity Commission reports are, again, a very useful contribution. Government's still digesting that. But if I was just to flag without kind of giving a tick to any particular recommendation coming out of those, but you know, if you were to look at some areas where government's already leaning in and which are also referenced in those papers, areas like increasing housing supply.
So there's already been some important work coming out of the 3-day Reform Roundtable, freezing the NCC Code, the EPBC Act, but look, there are other recommendations in those reports which would go to that issue. It's a first‑order issue for our country, giving young people access to homeownership, controlling house prices in light of our demographics.
So I would imagine that the government would be having a very close look at recommendations in that space. There's the clean energy transition, where again there's huge productivity implications in relation to how we undertake that transition. And I see it as an opportunity also but, you know, that's going to be a big policy in a challenge for our nation. So there's a number of recommendations in there around that.
And then there's an area that I also identify skills - which I think is absolutely critical. So building our human capital, but then of course dealing with, you know, skills, bottlenecks, if you will, in areas like construction so that we can lift the amount of construction output.
And then finally, I would say if we're looking at that kind of regulation and also building our capacity set of challenges where there's the greatest opportunity for driving productivity growth, I think AI is a big one. Now that's a multi‑portfolio issue. A number of senior Cabinet Ministers are already working together on that. That again is something which those reports go to. That is already a clear priority area for the government, and I'm sure that the Productivity Commission's work will be examined closely.
McKellar:
Good. Just to I mean you mentioned a number of aspects, because you really sort of pointed to some of the broader elements of a strategy for productivity, so if we go back to this point about, you know, what are the speed limits on the Australian economy? At the moment, we need to lift those speed limits. We have to have that broader approach [inaudible] in terms of regulatory reform that we would see that as one element.
You mentioned things like skills and training, labour productivity. Obviously, we do see that as an incredibly important part of a comprehensive agenda. The technology piece, you know, taking up artificial intelligence, continuing to rollout digitalisation, so that's an important part of the equation. The other bit, which we probably just want to dig into a little bit more, is the business investment piece, so capital, the role of getting that stronger business investment into the economy.
What are the ways that you see that we can do that? I think from a business point of view one of the things we would point to first up would be to say, you know, this is where things like the tax reform agenda comes into play. You're in the room. There was, you know, I think significant discussion around the tax reform options, intergenerational issues, business investment issues. You know, do you see that potentially getting reform of our tax system on the agenda front and centre, that's one way of doing that? There are other things that we can do to really boost business investment going forward. How important is that?
Mulino:
Yeah, thanks, that's a really important area. Can I just acknowledge Senator Pocock has arrived.
McKellar:
David just walked in, welcome.
Mulino:
Look, I'd say that capital accumulation and the capital to labour ratio and all the different aspects of that are clearly key drivers of long‑term productivity but also wealth. I think the tax dimension of it is an important one. And the government, and I hope this doesn't come across like a Question Time answer, but look, the government has, you know, an ambitious tax agenda, and so we're rolling that out. And there's been a number of dimensions of that; personal income tax cuts, the Pay Day Super, HECS reduction and forth. But, you know, tax was clearly also raised in great detail at the 3-day Economic Reform Roundtable, and there were a number of dimensions of that.
I think as the government considers tax going forward the issue that you flagged is clearly going to be one of them. I would also say though that there are other dimensions to capital. Tax is an important one and I think that is something government's going to have to look at. But there's also, you know, Australia has an attractive destination in a world where many jurisdictions are competing for tax. And look, I think we are very attractive already. We're very stable environment, we have very a skilled workforce, we have very strong institutions. But I just put that out there, that there's the overall environment for attracting capital, which is a key thing. And we always want to make sure that we're strengthening that as much as possible, albeit, as I said, I think we are already a very attractive destination for foreign capital.
And then the other broad set of issues I would flag is that there's the efficiency of the capital allocation mechanisms within our economy, and this raises a whole bunch of issues which the super sector has raised around the performance test RG97 and so forth. And I just flag that because that is something which the government is looking at. That is something that was raised at the 3-day Economic Reform Roundtable and is another dimension.
So I just say with capital, tax is an important dimension, but I'd say there are actually, you know, quite a few dimensions of that, you know, all of which I think are getting attention.
McKellar:
Sure. And I think I did hear you say you ruled out the cash flow tax, that's definitely off the table. [laughter] Oh no, sorry, I didn't mean to verbal you there.
Look, maybe time for just one final question, and it's timely that Senator David Pocock joins us because I want to go to the issue of small business, and we talk to David a lot about the interests of small business and we thank him for his ongoing support and advocacy and interest in the role that small business plays in the economy.
But I guess there and you mentioned in your points, you know, the sort of tell us once principle. I think from our point of view, one of the, you know, key things in focusing on how do we take that burden off small business is increasingly sort of moving in that direction. So I guess how much do you see it as important that we get a consistent definition for small business across the different areas of government, you know, different definitions with the ABS, with the tax office, you know, various departments and agencies and acts, the Fair Work Act has a different definition again, you know, how do we get some consistency in the approach to small business?
And what's the best way to alleviate some of that regulatory burden for small business, you know, in the areas where businesses, small businesses, medium sized businesses want to get into exporting, the number of different systems that they've got to deal with as trying to move goods or even exchange services across the border, how do we simplify things for small business? Is it about creating exemptions for small business? Having sort of thresholds or are there ways in which we can build in greater efficiency to make it easier for small business to deal with government?
Mulino:
So look, I must preface my answer here by saying that this is obviously Minister Aly's area, and I just would say I know this is a long-lasting set of issues. I'm not going to kind of come in with, you know, some kind of straightforward definitive solution for all of this. I mean I would just say from my perspective, again as not the person dealing with all the nuances of this day to day, on the face of it having multiple definitions is something which one would say, 'Well, you know, should we just align those definitions?' It kind of doesn't make sense to have on the face of it the same term defined very differently in different contexts.
Having said that, you know, you can imagine that if there are different areas of regulatory intervention, so for example one might be industrial relations, one might be the interaction of businesses with the tax system, one might be export support, I mean one can imagine that in terms of the substance of the interaction of those policy agencies with the businesses, you can imagine some settings where you might say, well look, in this policy context it kind of makes sense for us to be wanting to deal with organisations below this threshold, but it might be another context, like if it's export support, you might say, well look, we want to broaden the net a bit because we want to support some larger organisations.
And so does that lead to a situation where you kind of want to contain your regulatory impact in some contexts and say look, we don't want this to impact too many organisations, but we want to provide protections where they're targeted, but we want this grants program to be a wider application. Now again, I'm not speaking too specifically because I'm not on top of all the detail, but I'm simply saying I suspect, like in other areas that I deal with, what happens is in finance [inaudible] regulatory contexts where the same broad concept ends up needing to be applied in slightly different ways.
Now does that mean that we maybe use different terms? I don't know. Does that itself get a bit confusing? But I'd just say I would kind of start with is the core the content of the regulation in those different contexts inappropriate? That to me is the guts of it. Like I can imagine where using different thresholds make sense but, you know, if it makes sense to use the same threshold across all those different contexts, then maybe the definition is the right way to ensure that happens. But if it does, if it is appropriate to have different thresholds, then maybe we just need other ways to make it clear why that's the case.
So that's not a very clear answer, partly because it's outside my portfolio, but I simply would flag that this is not the only area where the same or all of sector finds itself affected by different thresholds.
