If deregulation is to aid Australia’s economic recovery then businesses must work with the government to effect real change in society, explains UNSW Business School’s Pamela Hanrahan.
Since the start of the coronavirus crisis, the government has been planning to ensure an adequate economic recovery coming out at the other end, according to Pamela Hanrahan, Professor of Commercial Law and Regulation at UNSW Business School.
In April, the government identified five priority areas for attention after the crisis. “A few of those we know include industrial relations reform, tax reform, infrastructure, skills and education to make sure the workforce is ready for the future. But the fifth one of those was identified as deregulation,” said Professor Hanrahan.
But there is now also strong emphasis on business leading the post-coronavirus recovery. Recently, speaking on the government’s plans to reset economic growth, Prime Minister Scott Morrison said: “We must enable our businesses to earn our way out of this crisis”. The Australian economy should be taken “out of ICU” by “focusing on the things that can make our businesses go faster”.
So business and deregulation will play a vital role in paving Australia’s road to recovery. “Every Australian government since the Fraser government has had some initiative which said: business regulation is out of control, it’s damaging innovation, it’s impacting productivity, it’s making the Australian economy less efficient and less competitive,” said Professor Hanrahan.
But deregulation, in the context of the post-coronavirus recovery, means the government and businesses must learn together to ensure success (this time around) and take this opportunity to effect real positive change in society.
“I’m hopeful … because there’s urgency. We’ve already, in the last six weeks, had at least 80 pieces of federal regulation changed or relaxed in response to the crisis and so far the sky hasn’t fallen in,” said Professor Hanrahan.
“That gives government confidence that it can be courageous about cutting some of this stuff back and it can do it with urgency; it doesn’t need to take three years of consultation.”
What role do businesses play in deregulation?
To achieve deregulation successfully, the government must trust that businesses have good intentions and are wholly transparent when lobbying for change. Unfortunately, this doesn’t always happen.
“Sometimes a business or a business lobby will come to government and say: ‘Oh, can you remove this rule, this is just a piece of red tape reduction … and politicians occasionally will be persuaded by that.”
The government might make the change and then discover the business wasn’t being transparent, for example, if a financial institution has thought more about what the impact may be on its shareholders and on its customers of getting rid of that sort of rule, explained Professor Hanrahan.
So if business genuinely wants to achieve deregulation, which will be critical in the post-coronavirus recovery period, then they’re going to have to engage with government differently and work together to achieve this.
There are two key things the government and its various consultative bodies, along with business, can do to ensure deregulation is a success.
Steps the government and business can take to ensure positive change
First, they must not underestimate the importance of technical knowledge around regulatory design, said Professor Hanrahan.
“That partly goes back to what I was saying before about not having that expertise, maybe to the same extent inside the public service,” she said. Rectifying this will require more attention to the various “nuts and bolts of how to change regulation” and not just which laws need to change.
The second step is for the government to better perform its intermediary role between business and consumers. The government’s intermediary role must incorporate a better understanding of why a company sometimes might want or need more rules relaxed, while consumers might want those rules strengthened.
“Say you have a compliance department in a big supermarket chain or a big bank; they don’t necessarily want to lose on investments by making it easier for smaller startup companies to occupy their space. Therefore, deregulation might not help them in that scenario. So sometimes they say they want rules relaxed, but they don’t.
“On the other side of that, sometimes we assume that consumers want more protection than they do. So knowing whether society needs some rules more than others is tricky, but wholly essential in the move to the post-coronavirus recovery.
“Hopefully, the awful experience that we’ve been through and that we’re going through as a society and as an economy at the moment will encourage government, business and consumer groups to think about, you know, let’s invest in this regulatory infrastructure and let’s see what we can do to make it better.”
For the full article on Deregulation: the road to recovery for business and government, visit BusinessThink which shares the latest UNSW Business School research stories, analysis, evidence-based opinion and insights.