To restore Australia’s economic health post coronavirus, wise old heads like John Howard and Peter Costello have prescribed slashing red tape and other unnecessary costs on the private sector that stand in the way of recovery. And now the Morrison government’s own Productivity Commission is reinforcing that remedial message. It has come out with a draft report calling for the removal of ‘unnecessary (and costly) regulatory burdens’ on a resources sector that, in providing two thirds of Australia’s exports, is central to lifting us out of a government-generated recession. Correcting the duplicated (and often conflicting) regulatory regimens between the Commonwealth and the states that make up part of the problem should be simple, now that premiers and the PM have mastered the techniques of talking to each other.
Many of the more absurd unnecessary burdens imposed on the resources and energy industries are state responsibilities. But when Treasurer Josh Frydenberg asked the Productivity Commission to report on Resource Sector Regulation last year (well before the present crisis made it so vital) he was aiming not only at the states. The recent one-third increase to an average of 1,000 days for resource approvals under the Environmental Protection and Biodiversity Conservation Act is a prime example of Commonwealth failure, with delays being blamed on ‘the high workload and working with project proposals to obtain additional information’. Not one of last year’s 221 EPBC referrals failed to be approved, eventually. So delays simply cost time and money. And as the PC notes, ‘the cost of delays to resource projects can dwarf actual regulatory costs’. In NSW the Department of Planning and Environment laments that ‘Environmental impact assessment documents are getting larger and more complex without necessarily improving decision making or public understanding’ – and the PC cynically observes that consultants face financial incentives to prepare lengthy reports involving unduly high costs to companies and delays by adding to the load on regulators.
These are only a part of the government-created obstacle course the PC wantS reformed. Noting ‘there is sufficient qualitative evidence of substantive unnecessary costs to suggest room for significant improvement in regulation of the resources sector’, it has called for submissions on its draft before making its final report in August. The draft outlined the inappropriate regulations, incompetent regulators, duplicated and conflicting administrations, unsound policy decisions, undue political influence and unsatisfactory legislation that enable anti-mining cases to be based on technical breaches that have no substantive impact on environmental outcomes but have costly delaying consequences for projects. These impose substantial unnecessary costs for negligible community benefit. Reform, it says, should have two aims: ‘Encouraging investment through reducing unnecessary regulatory burdens and building confidence and trust in the robustness of the regulatory regime across the community’.
But effective regulation requires competent regulators. Too often, the capability of the regulator is ‘deficient’, says the PC. It finds that regulators generally lack appropriate technical expertise, rarely visit sites and that this lack of knowledge contributes to the ‘risk aversion’ which manifests itself in requests for more (often inconsequential) information and putting off decision-making as well as imposing highly prescriptive post-approval requirements. This ‘risk-aversion’ (along with inconsistent decision-making) also arises from the many ‘grey areas’ caused by a lack of clear direction from governments about the role of the regulator. For example, NSW’s Independent Planning Commission, in what the AFR described as ‘Another example of government policy being snatched by regulators driven by climate zeal’ recently added to industry uncertainty by blocking projects on the basis of phase three CO2 emissions – those not from the miner but from its customers, even where they are in other countries with their own Paris agreement obligations. The PC dismisses this approach as ‘an ineffective mechanism for reducing global emissions’ and includes it among the uncertainties generated by policy decisions not based on sound evidence, such as blanket bans on gas exploration, that destabilise the investor confidence that we now desperately need.
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