Victoria named best state for business but BCA warns all governments must shape up

Victoria has been ranked as the best state for doing business in a new scorecard released by the Business Council of Australia, with the ACT and Tasmania listed as the worst due to excessive red tape, regulation and poor consultation processes.

But the report also slams the Federal Government, saying too much red tape has been pushed onto businesses and warns that excessive regulation will damage the economy. The council has pushed for a regular Productivity Commission review to investigate how new business regulations are made.

However, despite the warnings, the report is surely a welcome development for Victorian premier John Brumby, who is seeking re-election when the state heads to the polls next Saturday, on November 27. Brumby has attempted to win over the business community by promising a cut in payroll tax.

The BCA has said most states have improved their standing since the last report card was released in 2007, but too many states are still relying on “policy-on-the-run” decisions.

“While commitments have been made by governments across Australia, there is a continuing failure to establish robust checks on new regulation to ensure outcomes are efficient and effective,” chief executive Katie Lahey said.

The report also found the Federal Government has slipped in its rating from “good” to simply “adequate/good” due to the introduction of more regulations including Fair Work legislation. It also says a lack of transparency, including a shortage of consultation with business before introducing legislation, has hurt its standing.

“Regulatory responses must be balanced and operate in a way that does not impede growth and productivity.”

Victoria was the only state given a “good” rating, indicating the state includes a comprehensive framework of principles for good regulation-making, accountability mechanism and mandatory impact statement regulations.

The states were ranked:

• Victoria – Good
• Federal Government – Adequate/Good
• New South Wales – Adequate/Good
• Queensland – Adequate/Good
• Western Australia – Adequate/Good
• South Australia – Adequate/Good
• Northern Territory – Adequate/Good
• Tasmania – Adequate but with clear room for improvement.
• ACT – Adequate but with clear room for improvement.

Most states rated “good” for the “principles of good regulation-making”, with only Tasmania recording an “adequate/good” rating. It notes the Northern Territory has put in place new regulation-making frameworks, and the Queensland Government has implemented new systems including Regulatory Assessment Statement program.

However, all states only managed an “adequate/good” rating for accountability, with only Victoria recording a “good” rating.

When it comes to transparency, most states recorded an “adequate/good” rating, except for Queensland, South Australia and Tasmania which all recorded ratings of “adequate – but with clear room for improvement”.

The BCA said most states didn’t perform well in some aspects of the transparency process. “For example, a jurisdiction may have had a good RIS process in place that applied to all types of regulation, but may have had inadequate consultation mechanisms.”

It noted some improvements, with South Australia considering reforms for decision-making, and the Business Impact Assessment program in Victoria, but also said that more states need to improve consultation as part of the decision making process.

“Governments cannot adequately assess practical implementation issues, the compliance burden, and the costs of a regulatory proposal on business if they are not consulting business,” it said.

The BCA pinned the Commonwealth as one of the worst offenders, pointing to inadequate consultation timeframes for the employee share plans legislation, at five days, and the unfair contracts legislation, at just nine business days.

Finally, there were mixed results for the “review” section of the report. The Commonwealth and Western Australia recorded “adequate/good” ratings, with New South Wales, and Queensland recording “good” ratings. Victoria scored “good – with some improvement shown”, along with South Australia.

On the lower end, Tasmania recorded “adequate – but with clear room for improvement”, while the Northern Territory simply recorded “adequate”.

The Australian Capital Territory recorded a “poor” rating, the same it received in 2007.

The BCA said it is aware many jurisdictions are considering new review processes, but says that “if jurisdictions do not consider the national implications then inconsistencies and duplication can impose significant burdens on business and the community”.

It points to trading hours legislation, which differ from state to state, while it also points out that recognition of public holidays also differ depending on jurisdiction.

Overall, the BCA recommends key areas of improvement including creating the independence of oversight agencies, incorporating consultation in the regulation-making process, requiring independent agencies extend their monitoring and using confidential consultation processes.

“The BCA considers that COAG commitments on regulation-making processes can be improved, with
emphasis on reform by all Australian governments in the areas of ‘transparency’ and ‘accountability’.”

Lahey said the Commonwealth Government should take heed of the warning, given that it has slipped back in the scorecard from 2007.

Key criticisms include the Government using secrecy in relation to major reforms. It points out the Government has moved the Office of Best Practice Regulation out of the Productivity Commission, reducing its independence.

“The commonwealth increasingly administers some of the most important regulations that affect business and the Australian economy as a whole, with consumer laws being an example of new laws that have been centralised recently,” the report says.

“Important laws around taxation, corporations and competition are increasingly important to business and the place of Australia’s economy in the global economy. As such, the processes for regulation-making as well as review are critical to facilitating a competitive business and economic environment at a commonwealth level.”

And even though Victoria has been praised for its large use of consultation, transparency and accountability, the BCA still warns it hasn’t received an “excellent” rating and every state needs to pick up the slack.

“We acknowledge that since the last scorecard, effort has been made in some jurisdictions such as New South Wales, Queensland and Western Australia to respond to business calls for improved red tape performance. However, the 2010 scorecard shows that all jurisdictions need to improve.

“All governments should use this scorecard as a timely wake-up call to get serious about genuine red tape reform across Australia,” she said.