Explainer: How much does regulation cost Australia?
Commonwealth regulation may impose $115–160 billion a year in compliance and delay costs. The Government says its reforms will save $10.2 billion. But one figure is gross and the Productivity Commission's target is net.
Australia has begun putting surprisingly large dollar values on the cost of regulation. The Productivity Commission estimates that Commonwealth regulation imposes around $115 billion to $160 billion a year in compliance and delay costs. The Government, meanwhile, says its current reform program will remove $10.2 billion a year of regulatory burden.
But what exactly is being measured?
How is regulatory burden calculated?
The Productivity Commission favours Australia's existing Regulatory Burden Measurement framework, administered by the Office of Impact Analysis. It measures three types of costs.
Administrative costs are the staff time and resources needed to demonstrate compliance: completing forms, maintaining records, reporting information and making applications.
Substantive compliance costs are the things businesses must actually do or buy because of regulation — such as employee training, new equipment, IT systems, legal advice or accounting services.
Delay costs arise when regulation prevents economic activity from beginning. If a business is ready to operate but must wait six months for government approval, for example, the lost income attributable to that regulatory delay can be counted.
The methodology measures costs above business as usual. If a company would have installed a particular system regardless of regulation, it is not counted. Taxes, government licence fees, fines and most indirect or opportunity costs are also excluded.
For labour-intensive requirements, the basic calculation is essentially:
time required × labour cost × frequency × number of affected businesses or people.
New regulations are normally costed over ten years. One-off implementation expenses are spread across that period, and the result is expressed as an average annual cost in constant prices.
Where does $115–160 billion come from?
This is necessarily less precise.
The Productivity Commission's $115 billion lower estimate starts with the Commonwealth's detailed 2013 estimate of about $65 billion and scales it by nominal GDP growth.
The $160 billion upper estimate uses a recent external estimate that also incorporates indicators such as the volume and complexity of legislation, employment in compliance functions and growth in direct business costs.
The Commission acknowledges that repeating the original bottom-up costing would produce a better baseline, but would itself be expensive and time consuming.
Against this $115–160 billion base, the PC recommended reducing annual compliance and delay costs by $10 billion by 2030 — equivalent to roughly 6–9%. It deliberately chose a broader target than the UK and EU, which focus mainly on administrative costs.
What is the Government claiming?
The 2026–27 Budget goes slightly further, claiming $10.2 billion a year of gross regulatory savings once its reforms are fully implemented. Major components include around $3 billion from environmental approvals, $3 billion from housing reforms, $2.05 billion from National Competition Policy and $961 million from financial-sector reform.
Financial services account for $780 million from 14 legislative reforms and another $181 million from the Council of Financial Regulators' Better Regulation Roadmap.
But there is a crucial difference.
The PC recommended a net $10 billion reduction. The Government's $10.2 billion is gross.
If existing regulation is simplified by $10.2 billion but new regulation imposes another $3 billion of costs, the net reduction is only $7.2 billion.
That is the number that ultimately matters for productivity.
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