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It’s a pleasure to be able to join you here today to discuss a topic that I know the Australian Business Foundation and its members have a keen interest in – improving productivity.

I know that over many years the Australian Business Foundation has been a vocal proponent of the innovation and reform that will drive productivity improvements and assist Australian companies to prosper in a global marketplace.

Some of the Foundation’s research has been valuable in better understanding how we can continue to drive improvements in our productivity performance and I would like to take this opportunity to thank all those involved for those contributions.

I have long been a believer in the importance of productivity to drive economic growth and lift the standard of living in Australia.

Since becoming Federal Finance Minister in 2007 though, I have stepped up my own advocacy on the issue.

 It is a campaign that I and the entire Rudd Government are embarking on because we recognise it is absolutely paramount for Australia to improve its productivity performance.For much of the period under the Howard Government, Australia was in cruise control in terms of productivity performance.

With income rolling in from the mining boom we simply sat back and enjoyed the ride.Economist Ross Garnaut has aptly dubbed this period “the great complacency” because of the apathy the previous government demonstrated in tackling the issue.

The Intergenerational Report the Treasurer released at the start of this month contains a lot of data and various projections, but there is a key graph in the report that clearly indicates just how far our productivity growth has slowed in the first decade of this century.

The graph shows that in the 1990s productivity growth averaged 2.1 per cent following the microeconomic reforms led by the Hawke and Keating Governments in the 1980s and early nineties.During the first decade of this century it has fallen down to an average of 1.4 per cent and is trending down to barely above 1 per cent.

The Third Intergenerational Report shows the difference to Australia’s future between returning to the strong productivity growth path of the nineties and continuing along the current path of low growth.

The report states that Australia’s ageing population will result in labour force participation as a percentage of population reducing by close to 5 percentage points over the next 40 years.

What this means is that growth in living standards will need to be driven primarily by increases in labour productivity over the next generation.

A concerted effort by governments, firms and individuals to improve average productivity growth back towards 2 per cent per year would translate to an average annual economic growth rate of just above 3 per cent.

The result would mean average living standards for Australians, measured by real GDP per capita, would be $16,000 higher per year by 2050.

That means every Australian man, woman and child would be $16,000 better off a year.On the other hand if we let the trend of lower productivity growth continue, Australia will struggle to meet the major challenges facing our economy in the decades ahead.

It is for this reason that we have improving productivity performance at the forefront of our economic agenda.

The Rudd Government’s productivity reform agenda may not grab as many headlines as that of our Labor predecessors, but it is of no less importance.

It is an agenda that is centred on major investment in infrastructure, skills and innovation and importantly on economic and regulatory reform.In the two years since we have taken office the Government has made some major investments in these key drivers of productivity.

• We have invested record levels in long-term nation-building economic infrastructure, including vital investment in roads, rail and ports;
• We are doubling the investment in Australian schools over the next five years, and increasing overall real investment in education by more than 50 per cent; and
• We are investing in business innovation, including innovative manufacturing and helping businesses use technology to work smarter and faster wherever they are, through the high-speed National Broadband Network.

The Government’s investment will make sure the tools needed to improve productivity are available but ultimately it is the decisions that business leaders like you make that determine our productivity outcomes. 

 As much as many of you would like them to be, the decisions businesses make are not made in a vacuum; they are made in a regulated environment. That is why ensuring our regulatory framework is effective and efficient is crucial for Australia’s productivity performance.

That is why this Government’s Better Regulation agenda is a central element of our plan to improve productivity. Along with my Finance responsibilities I am also the Commonwealth’s first Minister for Deregulation.

 This Government actually has two Ministerial positions with direct responsibility for regulatory reform issues providing real authority to the agenda.

Although I am sure I need not tell anyone in this room the negative impact that cumbersome, ineffective red-tape can have on a business, it is worth noting that the Productivity Commission has previously estimated unnecessary red tape imposed by all Australian Governments costs our economy up to four per cent of GDP annually.

That’s more than $40 billion in today’s terms.In the just over two years since the Rudd Government was elected we have pursued an ambitious reform agenda to reduce that cost. It is the progress of that agenda that I would like to discuss with you today.

In November 2008, the Council of Australian Governments (COAG) signed a National Partnership Agreement to Deliver a Seamless National Economy.

This agreement commits $550 million to tackling 27 deregulation priorities, eight competition reforms, and a series of other regulatory process reforms.

As the name of the agreement indicates the aim of these reforms is to remove the jurisdictional differences that make dealing with regulation so costly and cumbersome, and ultimately to create a seamless national economy.

The COAG Business Regulation and Competition Working Group - which I co-chair with my colleague Minister Craig Emerson - has been responsible for progressing these reforms with the first tranche well advanced.From 1 July this year our Better Regulation agenda will deliver a range of outcomes including;

• Reforms to consumer credit regulation that will collapse the eight State and Territory regimes into a single uniform national system. This system will remove around 2,000 pages of regulation while enhancing consumer protection.
  
• Replacing State and Territory based regulation of trustee companies with a single national regulatory scheme. This will replace around 300 pages of separate and sometimes contradictory state-based regulations with a national regime
  
• Simplifying business‑to‑government financial reporting with the Standard Business Reporting system. This system is expected to save Australian businesses close to $800 million a year when it is fully operational.
  
• Establishing a single national registration and accreditation body for health professionals; and 
  
•  Replacing multiple state and territory trade measurement regimes with a single Commonwealth system.

I know progress in regulation reform is generally a slow process, but the important thing is that it is occurring.

And these reforms are just the beginning of our agenda. The Government has also made substantial progress in reducing the burden of unnecessary or poorly designed Commonwealth regulation and improving our regulation making processes.

We have an ongoing program of Better Regulation Ministerial Partnerships to ensure disciplined and coordinated approach to delivering regulatory reform across government.

Partnerships have already achieved reforms in areas including financial services products and patient access to health technologies.

Late last year an additional two Partnerships were announced, including a joint partnership between the Assistant Treasurer, the Minister for Home Affairs and I to transfer the administration of most excise equivalent goods from the Australian Customs and Border Protection Service to the Australian Taxation Office.

By delivering a single excise revenue agency for business to deal with, this reform will cut duplication and reduce compliance costs.

We are undertaking a systematic review of all Commonwealth subordinate legislation made before 2008.

This meets the commitment we made in February last year to document those regulations that impose net costs on business and identify areas where there is scope to improve regulatory efficiency.

This is the first review of this nature ever undertaken by a Commonwealth Government. And a review of internal Government red tape is also well advanced.

A stock take of Commonwealth regulation, and associated processes, has removed over 200 redundant regulations over the past 12 months.

In October 2008, I commissioned the Organisation for Economic Co-operation and Development (OECD) to undertake an independent review of regulatory reform in Australia.

The report – which has been released today – is the first ever OECD review of regulatory reform in Australia. In the report the OECD commends this Government’s macroeconomic management and states that our “well regulated and resilient financial sector has limited the direct negative impact of the financial crisis on the economy.”

The review goes beyond financial market regulation though; it looks at our whole regulatory framework. The report goes onto say that “Australia is one of the front running countries in the OECD in terms of its regulatory reform practices” and that our approach to regulatory reform makes Australia a role model for OECD countries.

This feedback is highly encouraging. The OECD has assessed the regulatory management processes of 26 other countries and ours are rated amongst the best.

But our work is by no means done. Indeed, the OECD cautions that successful reform requires maintaining momentum in the pursuit of continuous improvement.

The review stresses that Australia’s lacklustre productivity growth in the past decade makes it crucial that we continue to move forward with our regulatory reform agenda.The OECD has identified four broad areas where we can do more to strengthen our regulatory framework and improve productivity.

They have also made 27 recommendations of which the Government has agreed or agreed-in-principle with the overwhelming majority.

Today, I am announcing the actions that the Government will take to implement the recommendations made by the OECD.

The first area is enhancing engagement with the business community. Constructive feedback from people like you on current and potential reforms is imperative to ensure that we get the best possible results.

To enhance our engagement with business, the Government will use Web 2.0 technologies to allow business to engage directly with government to help identify regulatory reform opportunities.

As the Minister responsible for the Government’s web 2.0 agenda I will take a particular responsibility in seeing this implemented.

We will also commence a regular Business Forum with relevant business stakeholders to further enhance consultation in relation to the Commonwealth’s Better Regulation agenda and COAG’s Business Regulation and Competition Working Group’s program of reforms.

Since I became Minister for Deregulation I have run a regular informal consultation process with a group of business leaders who are active on regulation issues.

I will now proceed to make this process more formal and public.The second area the OECD identified is strengthening the contribution regulatory analysis makes to policy development.

 Improvements to the regulatory impact assessment processes are already underway, as the Government is developing a number of measures to further strengthen and improve the contribution these processes make to Government decision-making.

These changes are designed to improve the quality, timelines and ambit of Regulatory Impact Statements. The changes will be announced in the near future.

These initiatives will ensure that Australia’s regulatory assessment framework is world’s best practice and that new and amended regulation delivers the greatest benefit to the community at minimum cost to business.

The third area is strengthening Australia’s regulatory management processes to improve transparency and accountability.

To achieve this, the Government will require Australian Government regulatory agencies to outline how they will regulate to minimise burdens on business and the not-for-profit sector in their Statement of Intent to the relevant Minister.

Agencies will be required to report on these outcomes in their Annual Report.The final area identified by the OECD is ensuring that inter-jurisdictional arrangements focus on finding and removing barriers to doing business nationally.

Co-operation with State and Territory governments to improve productivity has been a high priority for this Government.

 There is no doubt that the process of harmonising regulations nationally is costly and time-consuming, but it is something that we are committed to achieving.

The Government will consult with States and Territories to encourage them to use their regulatory impact analysis to identify proposals that could affect national markets.

We will then look to have such proposals become the subject of consultation through a COAG body, such as the Business Regulation and Competition Working GroupThis will minimise opportunities for individual jurisdictions to create new cost and regulatory barriers to doing business nationally.

The Government’s Response to the OECD Review of Regulatory Reform in Australia, which I am releasing today, contains a number of other initiatives including;

• pursuing ongoing competition reform with the States and Territories, including opportunities in relation to the National Competition Policy legislative review program;
  
• requiring agencies to develop and publish guidelines on how they will facilitate more effective consultation with the community on regulatory issues;
  
• revising the Best Practice Regulation Handbook to reflect our changes including guidance on issues such as the application of risk-management strategies for compliance and enforcement; and
  
• developing a systematic approach to the five-yearly reviews of regulations that are not subject to statutory review or the sunset provisions in the Legislative Instruments Act 2003.

The feedback we have received from the OECD review is absolutely crucial to further improving our regulatory reform.

Feedback on our progress is more than welcome, to assist the Government in progressing its reform agenda to ultimately lessen the negative impact that ineffective red-tape has on our nation’s economy.

The COAG Reform Council will be releasing its own assessment of the progress achieved in the implementation of the Seamless National Economy plan in the coming weeks.

 This report will assess the progress of the COAG Business Regulation and Competition Working Group’s agenda up until 30 September 2009 –the first nine months of a five year agreement.

Since that time there has been some significant progress in areas such as food regulation, director’s liability and a national construction code.

The report will contain useful information on where we are making progress and where more work needs to be done.

As I said earlier, improving Australia’s productivity performance is imperative if we are to meet the longer term fiscal pressures identified in the recent Intergenerational Report. Ongoing regulatory reform is crucial to improving that performance. 

The OECD report released today highlights the important work that we have done already to progress our Better Regulation agenda.

 It also highlights the importance of a sound regulatory framework for sustaining economic resilience and stability.

Importantly, the report also gives advice on how we can further improve our regulatory framework and the announcements I have made today in response to the OECD’s recommendations will do exactly that.

This Government will continue to work with the business community to improve Australia’s regulatory framework and drive the productivity improvements needed to ensure that the future in Australia will be a prosperous one. 

-ends-