The latest Australian Industry Group/Deloitte CEO survey released on Tuesday, "Business Regulation," points to the high and rising cost of complying with regulation for Australian businesses.

At a time when pressures are intensifying to innovate business practices, the growing burden of regulation is proving a barrier to innovation and growth, the group says. It requires urgent government attention.

According to the survey of 322 CEOs from the manufacturing, services and construction sectors, the average business spends almost 4 percent of its annual costs on complying with regulation.

This is a major cost component on business particularly at a time of ever-tightening margins and general global and domestic economic uncertainty.

Other key findings in the report include:

  • CEOs say business regulations are hampering their ability to improve their businesses by engaging in trade, introducing new products and services and changing work practices.
  • Around one-third of CEO respondents indicate regulations are a substantial barrier to employing more staff which is critical for business growth.
  • Some 70 per cent of respondents have experienced a rise in compliance costs over the past three years.
  • More than 75 per cent of CEOs report that they expect a rise in compliance costs in the next three years. Around 37 per cent of respondents anticipate that carbon pricing regulation will be the major driver of increased compliance costs in the next three years.

Deloitte Managing Partner, NSW, John Meacock, said that while it is clear from this survey that regulatory compliance costs remain an issue for business, regulatory change can also present opportunities for business to get ahead of the game.

"Managing future changes with maximum efficiency should also be accompanied by strategies to take advantage of regulatory change. A strong case in point is the carbon pricing scheme and how organisations can strategically position themselves to take advantage of the changes," said Meacock in a statement.

Australian Industry Group Chief Executive Heather Ridout said: "What is painfully clear from this report is the burden regulation is having on the costs of doing business in Australia. Despite all the talk of aspiring to be a seamless national economy, our red tape burden is rising not falling."

Ridout pointed out that at this critical time for the economy, the Australian government is considering a carbon tax, which many respondents anticipate will be the major driver of increased compliance costs over the next three years.

"This is a major concern for business productivity and competitiveness. Other key areas identified as needing urgent action include occupational health and safety, workers compensation, industrial relations and regulations affecting the employment of labour and trading internationally," she added.

Survey highlights:

  • The average business spends close to 4 per cent of total annual expenditures on complying with regulation.
  • Close to 70 per cent of respondents have experienced a rise in compliance costs over the past three years and around 75 per cent expect a rise in compliance costs in the next three years.
  • Around 80 per cent of total compliance costs are in the form of payments made to external service providers (accountants, lawyers etc).
  • Two-thirds of respondents report that waiting for regulatory decisions is associated with the greatest costs.
  • Around 27 per cent of respondents indicated there are significant regulatory barriers to changing workplace practices.
  • Occupational health and safety and workers compensation schemes require the most compliance time according to 15 per cent of respondents.
  • Regulations associated with importing and exporting activities are the most time consuming compliance activity for around 10 per cent of businesses.
  • 9.2 per cent of respondents said that compliance with other regulations associated with employing workers (superannuation, monitoring award changes) is highly time consuming.
  • Larger (100 employees or more) businesses spend relatively more time (27.2 hours per week) compared to medium (16.8 hours) or small businesses (7.3 hours) on compliance related activities.
  • The rise in compliance costs over the last three years has been driven by greater demands relating to OHS, environment protection and taxation.
  • Around 37 per cent of respondents anticipate that carbon pricing related regulation will be the major driver of increased compliance costs in the next three years.
  • Businesses experience the greatest amount of red tape (excessive paperwork, delays, difficulty accessing information) in dealing with industrial relations and workers compensation regulatory agencies.
  • Close to 20 per cent of businesses believe there should be some consolidation of information provided to regulatory agencies, including:-
  • Around one-fifth of respondents believe regulatory information is difficult to find or not available.