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Red tape costs the Australian economy 176 billion AU dollars (129 billion U.S. dollars) a year, or 11 percent of the country's gross domestic product (GDP), said a report released by a free market think tank on Wednesday.
The Institute of Public Affairs (IPA) said in its press release that a new research by the institution finds out that the cost of red tape is far greater than the Commonwealth Government's current estimate of 65 billion AU dollars (47.7 billion U.S. dollars) per annum, which is equivalent to 19,300 AU dollars (14,185 U.S. dollars) per household in Australia.
The government's Annual Deregulation Report series ignore state-local government compliance costs and the non-compliance costs of federal, state and local red tape, while the survey methodology used by the government is potentially dubious, said the IPA.
According to the World Economic Forum's Global Competitiveness Report 2015-16, Australia ranks 80th in the world for burden of government regulation, said Chris Berg, senior fellow at the IPA.
"This means we are in the bottom half of the world rankings when it comes to red tape. All that red tape has very real consequences," he said.
"Every minute employees spend pandering to red tape requirements, is a minute those employees are not dedicating to entrepreneurial innovation and economic activity" said Berg.
The IPA has identified red tape as the biggest priority facing the next Australian government. Red tape, which reduces entrepreneurship, is a handbrake on economic growth and hurts Australia's international competitiveness.
"That makes red tape a larger industry than the mining industry, which is 7 percent of GDP, the manufacturing industry, which is 6 percent of GDP, and agriculture, which is 2 percent of GDP", said Berg.
According to the report, the costs of regulation can be classified in two categories.
The first is compliance costs of meeting red tape requirements and standards, including administrative (or paperwork) costs of filling forms and providing records and substantive costs of staff training, maintaining plant and equipment, asset hoarding costs and income losses associated with regulation-induced delays in projects, and using professional services to meet red tape requirements.
The second is economic costs arising from red tape distorting the utilisation of resources within the economy, as well as the efficient use of resources over time affecting competition, innovation, and entrepreneurial conduct.
(APD)
