AUSTRALIAN GOVERNMENT RESPONSE TO
OECD 2009 REVIEW OF REGULATORY REFORM: AUSTRALIA
Regulatory Governance
OECD recommendation / Australian Government responseRecommendation 1: Expand the framework for the accountability of Ministers, and regulatory authorities for the delivery of the regulatory reform agenda / Agree.
The Australian Government will strengthen its processes for analysing the impact of regulation particularly whereCommonwealth regulatory action could potentially impose on business and the not-for-profit sector. These changes will strengthen the accountability of government agencies for assessing regulatory impacts. As not all regulations are developed by Ministers, departmental secretaries or agency heads or their deputieswill be required to agree to the content of Regulation Impact Statements (RIS)which are provided to the Office of Best Practice Regulation (OBPR) for assessment.
To improve the accountability of Australian regulators, agencies will be required to outline in their Statement of Intent to their responsible Minister how they will regulate to minimise unnecessary costs and burdens on business and the not-for-profit sector and report on outcomes in their Annual Reports.
Recommendation 2: Continued advocacy and communication of the benefits of regulatory reform / Agree.
In responding to the Report of the Government 2.0 Taskforce, Engage: Getting on with Government 2.0, the Australian Government will use Web 2.0 technologies as a means of allowing business to assist the Government in identifying scope for removing unnecessary regulation and undertaking regulatory reform. For example, the Better Regulation Executive in the United Kingdom enables business and citizens to submit ideas for improving regulation – the Government will consider whether this initiative would be practical in the Australian context.
Recommendation 3: Expand guidance on stakeholder management / Agree.
The principles endorsed by the Government which agencies are encouraged to follow in consulting with stakeholders as they develop regulatory proposals are set out in the Government’s Best Practice Regulation Handbook:
- continuity — consultation should be a continuous process that starts early in the policy development process;
- targeting — consultation should be widely based to ensure it captures the diversity of stakeholders affected by the proposed changes. This includes Commonwealth, state, territory and local governments, as appropriate;
- appropriate timeliness — consultation should start when policy objectives and options are being identified. Throughout the consultation process stakeholders should be given sufficient time to provide considered responses;
- accessibility — stakeholder groups should be informed of proposed consultation, and be provided with information about proposals, via a range of means appropriate to those groups;
- transparency — regulators need to explain clearly the objectives of the consultation process, the regulation policy framework within which consultations will take place and provide feedback on how they have taken consultation responses into consideration;
- consistency and flexibility — consistent consultation procedures can make it easier for stakeholders to participate. However, this must be balanced with the need for consultation arrangements to be designed to suit the circumstances of the particular proposal under consideration; and
- evaluation and review — policy agencies should evaluate consultation processes and continue to examine ways of making them more effective.
The Government will strengthen the requirement for agencies to demonstrate that effective consultation has been undertaken in order for a RIS to be assessed as compliant. Agencies will be required to develop their own consultation practices and publish details of them.
The Minister for Finance and Deregulation and Minister Assisting the Finance Minister on Deregulation will commence a regular forum with groups including the Business Council of Australia, Australian Chamber of Commerce and Industry, the Australian Industry Group and other business stakeholders. These forums will enable the Australian Government to consult with business in relation to both the regulatory reform agenda at the Commonwealth level, and the programme of reforms being undertaken by the Business Regulation and Competition Working Group at the inter-jurisdictional level. They will complement the suite of consultation mechanisms used by the Government.
Recommendation 4: Develop a more systematic and transparent approach to reducing the burden of regulation / Agree.
The Government seeks to reduce regulatory burdenson business and the not-for-profit sector through initiatives such as Better Regulation Ministerial Partnerships between the Minister for Finance and Deregulation and his ministerial colleagues, to progress substantive reforms of areas of Commonwealth regulation. The Government has recently completed Partnerships in relation to health technology assessments and product disclosure statements for financial products, and will build on this approach with seven new Partnerships in 2010.
The Government has commenced the first complete systematic review of Commonwealth subordinate legislation – some 30,000 items – which will be completed in 2010.
The Government is delivering on its commitment to remove regulatory barriers across state borders through its Seamless National Economy initiative within the Council of Australian Governments (COAG) to progress 27 national deregulation priorities and 8 competition reforms. First year progress was recently reviewed by the COAG Reform Council.
The Government has commenced a review of internal red-tape as a means of reducing unnecessary administrative costs. The review is being conducted by the Department of Finance and Deregulation and will be completed by mid-2010.
The Government does not support approaches such as regulatory budgets and administrative savings targets as a means of reducing regulatory costs to business. Actual savings from these measures can be difficult to establish and do not always deliver substantive reductions or improvements in regulation.
Recommendation 5: Strengthen the contribution of RIA to policy development and extend the monitoring and reporting on the quality of RIA processes / Agree.
The Australian Government recently agreed a suite of measures to strengthen the Regulatory Impact Assessment and Regulatory Impact Statement process. These measures include:
- requiring that a RIS be prepared for all regulatory proposals except where the impact of a proposal is minor or machinery;
- requiring departmental secretaries or agency heads or their deputies to agree to the content of a RIS, prior to assessment by the OBPR; and
- creating a central online register for the publication of RISs. While these documents have previously been available online, they have been located in diverse locations. A one-stop shop for RISs will enable stakeholders and other interested parties to access RISs more easily.
Recommendation 6: Use scheduled reviews of regulation to promote continuous improvements to regulation. / Agree.
The Australian Government is undertakinginitiatives such as Better Regulation Ministerial Partnerships and the pre-2008 review of subordinate legislation, discussed in the response to Recommendation 4, to address the stock of existing regulation.
The Department of Finance and Deregulation works closely with agencies during the policy development process for new regulation. It is actively engaged with agencies by providing expertise in regulatory analysis.
In addition, all regulations that are not subject to statutory review or to the sunsetting provisions of the Legislative Instruments Act 2003 will be subject to review five years after their introduction. The first tranche of five-yearly reviews are set to commence in 2012.
A screening process will be used to identify those regulations that should be reviewed. The OBPR will provide advice to departments and agencies to assist with identifying which regulations should be reviewed, and on the modality of each review.
In addition, the OBPR will provide advice to departments and agencies on appropriate quality control mechanisms and other matters, including the consideration of related policy issues, associated with the review of particular regulations.
A trial of the proposed approach is being conducted with selected departments and agencies in 2009-10 to identify the scale and scope of the task. The final approach to the five-yearly reviews will be finalised taking into account the results of this trial.
Recommendation 7: Expand the use of risk-based strategies in the development of regulation and compliance strategies building on existing practices by agencies / Agree.
The Australian Government supports continued use of risk-based approaches, which are well established in Australian Government agencies, particularly in the financial sector. For example,the Australian Prudential Regulation Authority (APRA) has developed a risk-based approach under which institutions facing greater risks receive closer supervisory attention. This enables APRA to deploy its resources in a targeted and cost-effective manner. APRA seeks, where possible, to act pre-emptively, so that emerging threats to financial institutions are addressed before the interests of beneficiaries are damaged.
The Government will provide clear guidance on the application of risk-management strategies to compliance and enforcement methods, in revising its Best Practice Regulation Handbook.
The Government supports the need for regulators to share lessons about good performance and innovation in regulatory products. In the financial sector, APRA and ASIC already meet informally on a regular basis. The Best Practice Regulation Coordinators forum, comprising senior officials responsible for regulatory quality in each Australian Government agency,will develop opportunities for regulators to share best practice.
Recommendation 8: Strengthen the quantitative underpinnings for evidence-based decision making / Agree.
Quality data is essential to facilitate evidence-based decision making. The Australian Bureau of Statistics (ABS) assistsinformed decision-making, research and discussionwithin governments and the community,by leading a high quality, objective and responsive national statistical service, as well as coordinating surveys conducted by Australian Government agencies. In the 2009-10 Budget, the Australian Government provided $344m to the ABS for the 2009-10 year, including $60million over four years to maintain the statistical capacity of the ABS.
The Australian Government’s Best Practice Regulation Handbook continues to require regulatory impact analysis for regulatory proposals. Where regulatory proposals would have a significant regulatory impact, quantification is an important tool in supporting evidence based decision making. The OBPR provides training and support to Commonwealth policy officers to conduct regulatory impact analysis, including quantification and business compliance cost calculation through the Business Cost Calculator tool.
Multi-level Regulatory Governance – Federal-State Relationships
OECD recommendation / Australian Government responseRecommendation 9: Ensure national institutional arrangements can support ongoing regulatory reform / Agree.
COAG’s Business Regulation and Competition Working Group (BRCWG), chaired by the Minister for Finance and Deregulation and the Minister Assisting the Finance Minister on Deregulation and comprising senior officials from all jurisdictions, meets regularly to maintain progress in removing major regulatory barriers between jurisdictions identified by COAG.
The Government will consult with the states and territories to determine scope to expand the work of the BRCWG, to monitor new regulatory proposals generated by all jurisdictions to ensure that new barriers to doing business nationally are not created. States and territories could be encouraged to use their regulatory impact analysis to identify regulatory proposals which could affect national markets. Such proposals could be referred to BRCWG to determine scope for a nationally consistent approach. This would represent an important step towards a seamless national economy.
The Australian Government notes the OECD’s recommendation regarding an ongoing competition reform agenda, and will continue to work with its state and territory counterparts to ensure that appropriate national institutional arrangements are in place to support future reform efforts.
Recommendation 10: Maintain momentum for reform through establishment of formal arrangements for ongoing consultation with business in relation to current and proposed regulatory reforms / Agree.
The Minister for Finance and Deregulation and Minister Assisting the Finance Minister on Deregulation will commence a regular forum with major business stakeholders, discussed in the response to Recommendation 3.
Recommendation 11: Strengthen regulatory management mechanisms at State level through ongoing benchmarking and co-operation / Agree.
The Commonwealth, state and territory governments have committed to improving processes for regulation making and review under the third stream of the National Partnership Agreement to Deliver a Seamless National Economy. A number of measures to strengthen regulatory management mechanisms at the state and territory level have already been implemented, including establishing gate-keeping mechanisms, improving regulation impact analysis through the use of cost-benefit analysis and better measurement of compliance costs, and applying these arrangements to Ministerial Councils. The Government will consider additional benchmarking, information sharing and networking opportunities with the states and territories.
Recommendation 12: Strengthen the compliance and transparency of impact assessment of decisions taken by Ministerial Councils / Agree.
The Australian Government will seek COAG’s agreement to enhancements to the COAG Principles of Best Practice Regulation. OBPR will inform Ministerial Councils where a RIS is inadequate or a proposed decision will be non-compliant with the RIS requirements. This will strengthen compliance with COAG decision making requirements by Ministerial Councils. Further, a requirement that reasons for the assessment of a RIS as inadequate(where this is the case) are published, will strengthen transparency of COAG RIS requirements by Ministerial Councils.
COMPETITION POLICY
OECD recommendation / Australian Government responseRecommendation 13: Consider more vigorous action to promote competition in telecoms and electric power / Agreed in principle.
The Australian Government continues to work with the states and territories through COAG’s Ministerial Council on Energy (MCE) to promote competition in energy markets.
MCE has made significant progress in establishing the national electricity market framework, including most recently the establishment of the Australian Energy Market Operator on 1 July 2009.
The Australian Government supports the process of removing retail electricity price caps where effective competition has been demonstrated and notes the program of competition reviews being undertaken by the Australian Energy Market Commission (AEMC). On 1 January 2009, following an AEMC review which found retail competition to be effective, Victoria removed its retail price caps.
Ultimately decisions to reduce barriers to competition, such as further privatisation and the removal of retail price regulation, are decisions for individual state and territory jurisdictions. In this regard we note that the recent announcements by the New South Wales Government in relation to its intentions to sell i)electricity retailers; and ii) the rights to trade the output of power stations, hold significant promise.
The Australian Government agrees with the OECD’s assessment that in the telecommunications sector, ‘failure to separate completely the network-monopoly elements from its competitive operations may be dampening competition and complicating regulation’. Consistent with this view, the Government is taking significant steps to enhance competition in Australia’s telecommunications sector.
On 7 April 2009 the Australian Government announced the establishment of a new company to build and operate a new super fast National Broadband Network (NBN). The Government is committed to the NBN being a wholesale only open access network. This means that infrastructure management will be separate from retail service provision, as suggested in the Review.
On 15 September 2009 the Government announced fundamental reforms to existing telecommunications regulations. These reforms are aimed at delivering structural reform to the industry in the transition to the NBN, while providing the flexibility for Telstra to choose its future path. The package has three primary parts:
- addressing Telstra’s vertical and horizontal integration;
- streamlining the access and anti-competitive conduct regimes; and
- strengthening consumer safeguard measures such as the Universal Service Obligation, the Customer Service Guarantee and priority assistance.
The reforms also seek to promote competition by preventing Telstra from acquiring additional spectrum for advanced wireless broadband while it remains vertically integrated; owns a hybrid fibre coaxial cable network; and maintains its interest in Foxtel. There is scope for the Minister to remove the spectrum acquisition restrictions in the event that Telstra submits to the ACCC an acceptable undertaking to structurally separate.
Recommendation 14: Finish the unfinished business of the NCP legislation review / Agreed in principle.
The Australian Government accepts the principle underlying the OECD’s recommendation and agrees that the National Competition Policy Legislative Review Program has produced clear economic benefits.
The Productivity Commission’s 2005 Review of National Competition Policy Reforms found that the Legislative Review Program as part of National Competition Policy had played an important role in winding back barriers to competition and efficiency across a wide range of economic activities. The Productivity Commission cited evidence of the resulting benefits such as increased consumer choice, lower prices, new employment opportunities, a reduction in ‘red tape’ and improved national consistency across a range of regulatory activities.
The Australian Government remains committed to working with its state and territory counterparts to ensure that remaining restrictions are examined, and where appropriate removed, particularly in those areas likely to yield the highest efficiency and welfare improvements.
Recommendation 15: Maintain the regular review to identify and correct constraints on competition / Noted.