Resist the Red Tape Impulse. By Danielle Wood, Chair of the Productivity Commission in Australia, at Inflection Points.

Wasn’t it easier to just get things done back in the day? As a matter of fact, it was. Our regulatory burden has grown: the number of restrictive terms in Commonwealth Acts of Parliament and legislative instruments grew dramatically in the two decades to 2020.

In practice, this looks like ever-more approval hoops to get anything done. In Brisbane, it takes 31 approval steps to open a café. Until recently, federal environmental approvals for wind energy projects could add $5 million in costs and months of delays. …

Anyone who has worked in a large business will tell you that their stock of policies and procedures grows faster than remuneration packages.

The cost to comply with all this regulation can be eye-watering. Macquarie estimated it spent $1.2 billion on compliance in 2025, up from $405 million in 2017. …

Ticking all these boxes takes time. Corporate boards devoted 55% of their time to risk and compliance issues in 2025, up from 24% in 2015. For small business owners, it means less time on the tools, and less time to think about how they might expand. …

In our major cities, for example, regulations add about $200,000 to the cost of a new house, and $90,000 to the cost of a new unit. That pushes a lot of potentially feasible developments into the ‘doesn’t stack up’ column, leading to fewer houses being built. …

On some measures, our regulatory burden has grown less than the US or Europe. …

As we get richer we buy pay more to avoid risk:

Red tape hasn’t proliferated by accident. Our changing social risk appetite drives demand for new regulations. And that demand is supercharged by our political structures, which mean more regulation is the reflex response to any crisis or thorny issue. …

As we get richer and more comfortable, we can afford to be less tolerant of risks. … This changing risk appetite manifests in greater expectations on governments to prevent and minimise harms —  more regulation.

Our demand for more and better regulation has led to positive outcomes … In 2004, there were 3 deaths per 100,000 workers; in 2024, there were 1.3 deaths per 100,000 workers. Safety regulations and interventions are associated with fewer accidents at work. …

Frenzies:

But we’re predictably irrational in the way we assess risk.
We can be swept into frenzies about risks that weren’t even on our radar before (was anyone tracking the risk of needles in strawberries before 2018?), demanding politicians ‘do something’ before a cost-benefit analysis can even get its shoes on. …

This creates asymmetric incentives. Non-existent entities — the business that didn’t get started, the granny flat that didn’t get built, the tradie who didn’t move across state lines — are by definition less visible and vocal. …

Asymmetry:

The incentive for ‘just in case’ regulations, and a cautious interpretation of those on the books, is strong. And there’s not much pull in the other direction. How many policy makers get a public commendation when they choose not to regulate?

There are a few willing to hold the line until level heads can assess the right response. …

The only recent Australian example I can recall is the South Australian premier resisting calls for an inquiry following a serious accident at the Tour Down Under. “I’m reluctant to overreact to it given that it is such a freak occurrence,” he said. If only more were willing to utter those words. …

Regulations seem like an easy response to hard problems:

Governments increasingly default to regulation when they can’t, or aren’t willing to, actually ‘solve’ a tough problem. It feels like a get-out-of-jail-free card: a way to stake out a position with minimal budgetary cost.

This is particularly evident in our growing business reporting requirements. Businesses are now required to report on slavery in their supply chains, on the climate emissions of their suppliers, and on their gender pay gaps.

Publishing information that enables customers and workers to make informed decisions might feel like an unambiguously good, even pro-market, thing to do. But, like everything, it has a cost.

How do we manage before all those regulations? Life was better, in many ways. Some easy productivity wins are possible here, surely.