Opening statement to Select Committee on the Future of Public Interest Journalism

A free press underpinned by laws and norms that respect freedom of speech is one of the foundations of liberal democracy. The fact that freedom of speech in the press has an important role in our democracy does not mean that parliament should take it upon itself to support journalism, whether it is publicly interested journalism or not. The question of how to fund journalism is a question for entrepreneurs, not the parliament. The reason I argue this is that government is not an uninterested participant in the public debate. Governments have an interest in favouring journalists and media outlets which are sympathetic to their world views and attacking those they do not. We saw how perversely this dynamic could play out during the media reform debate in 2011 and 2013, and of course we see it in our regular debates about the ABC. Further government involvement in the press would mean that governments have more leverage over the press.

With this in mind, I would like to briefly address two issues that have been raised in debate over public interest journalism so far. Right now, the government directly provisions journalism through the ABC and it has been suggested that this provision be increased, but, as Professor Sinclair Davidson at RMIT and I will argue in a forthcoming book, the ABC is not an independent media organisation.

CHAIR: What’s the name of the book?

Dr Berg: It’s at the moment called ‘Against public broadcasting’, but we haven’t actually finalised the title.

Senator XENOPHON: Senator Dastyari is good at book titles.

Dr Berg: We’ll open that up for recommendations, of course, as we would. The ABC is the only media outlet dependent entirely on the government for its operating expenses, it’s the only media outlet regularly dragged in front of parliamentary committees to answer for minor programming decisions and the ABC is regularly accused of bias by the Left and the Right. This bureaucratic one billion-dollar government owned television and radio network is not the ideal vehicle for the sort of journalism that would suit our digital age.

The second issue that I’d like to raise is the proposal to give public interest journalism outlets deductible gift recipient status. This has much to recommend it, in my view. DGR status would be available to media outlets professing any political slant. DGR status would encourage media firms to self-fund, to be accountable to their supporters and readers, and it would not constitute a direct call on public revenue. One concern with this model, however, is that it would require an authority to decide which media outlets are legitimate public interest journalism outlets and which are illegitimate ones. Poorly designed, this could easily transform into a de facto licensing body through which the government may be able to exert some influence over the press. If the committee recommends this sort of reform, it should think very clearly about how that would be done. There are concrete things the parliament could do to help journalism in the digital age. For instance, the government should review limits on the freedom of speech. You probably don’t want me to talk any further about 18C of the Racial Discrimination Act, but I would draw the committee’s attention to the heavy burden of defamation laws and our lack of fair-use exception for copyrights. I welcome the Senate review announced into the law of contempt.

More generally, media outlets will benefit from regulatory reform that reduces the burden of red tape on the Australian economy. The policies which help firms thrive in the general economy would be the same policies that help media firms and, ultimately, help public interest journalism thrive.

Opening statement to Senate Standing Committee on Economics Inquiry into the Treasury Laws Amendment (GST Low Value Goods) Bill 2017

With Sinclair Davidson

We recommend that the Treasury Laws Amendment (GST Low Value Goods) Bill be rejected by the parliament. It is our view that this is not an integrity measure, that this is not the government closing a loophole in the GST legislation as they claim, but rather that this is a new tax. This new tax does not promote fairness for Australian retailers or consumers. It deviates quite substantially from the current GST design and is only superficially similar to the GST in that it has a 10 per cent rate. The GST itself is a tax which purports to tax Australian consumption, but it is actually a sales tax, and the legal incidence of this tax is on the seller of the goods, and the economic incidence is the assumption that the tax is then passed on to final consumers.

This particular tax, however, does not vest legal incidence in the seller of the goods; it vests legal incidence in the electronic distribution platform and/or the people offering transportation services. It is those companies and entities which facilitate a transaction between foreigners and Australians who will bear the tax, not the seller and not the consumer. This is not a tax on Australian consumption at all, but rather it is a tax on trading with Australians.

As an aside, I noticed before that you were concerned about double taxation. If this tax is collected by the foreign seller or the electronic distribution platform, they may have a problem convincing their own tax authorities that this is not revenue to them, and they may in fact then be taxed on that in their home country. So they need to be able to tell a story that remitting money to the Australian government is actually a legitimate business expense, and I suspect we will find that it is not. So double taxation will come in, in that these foreigners in fact will be taxed in their home countries on a 10 per cent increase in revenue. I was also astonished to discover that the authorities—certainly the tax office—seem to be recklessly indifferent to consumer fraud. That is certainly a massive problem.

The unintended consequences of this tax are such that I think the government has not much thought about these consequences at all. It is very likely to reduce competition in the domestic market as foreign sellers withdraw their services and stop selling. It is likely to expose Australians to darker elements of the internet, reducing antifraud protections and consumer protections that they currently enjoy. It draws foreign entities into the Australian tax net, which currently are exempt from the Australian tax net. No thought has been given at all to the consequences of Australian businesses then being drawn into foreign governments’ tax nets. So not only will there be a greater compliance on foreigners imposed by the Australian government; foreign governments will in turn put a compliance burden on Australian businesses hoping to trade with their citizens. That has not been discussed at all. So the net compliance effect of this is unknown, certainly much more than the budgeted amount of $13 million, which I think is just the salaries of the people who will be working on this. The increased compliance cost on small business is likely to create a barrier to growth. Obviously, large Australian businesses are in a position to wear those fixed costs of foreign compliance. This will create a barrier to small business growth in Australia and again will be a barrier to entry.

This fails as a protection mechanism. Australian consumers pay well above 10 per cent price differentials when buying from domestic retailers than with foreign goods anyway. It fails to produce substantial revenue for the Australian government. We estimate it is less than 0.2 per cent of additional revenue on the existing GST. It is not clear to us that these inherent flaws can ever be repaired. If the government were to simply abolish the $1,000 threshold at the moment, they would find themselves in the position of having to borrow money to collect revenue at a loss, which of course is a completely nonsensical position.

We think the government should leave well enough alone, not introduce a new tax, not expose Australians to the dangers of the dark internet and substandard or unsafe goods, and not encourage Australians to move away from reputable online sellers. So this has no redeeming features whatsoever and it should not be legislated into existence. Thank you.

Opening statement to Commonwealth Senate Select Committee on Red Tape inquiry into the effect of red tape on the sale, supply and taxation of alcohol

With Darcy Allen

The Institute of Public Affairs welcome the opportunity to appear before this inquiry. Red tape is one of the most pressing challenges facing Australia. A recent IPA estimate calculated that red tape costs us $176 billion in forgone economic output every single year. That $176 billion is more than we pay in income tax and it is the equivalent of Australia’s largest industry. Cutting red tape is one of the keys to ensuring our future prosperity; therefore the present inquiry into red tape is welcome. Liquor licensing in particular is a significant burden on Australian businesses. This is a red-tape problem not only for late-night venues but for thousands of cafes and restaurants across this country.

If we look to South Australia as an example, there are more liquor licences for restaurants than under any other category. Business owners spend millions of dollars in compliance costs each year and these pieces of red tape generate economic distortions that hold our country back. The central contribution of our submission is a broad, cross-jurisdictional analysis of liquor-licensing regulations. We have two main findings. First, that across various states there are multiple different types of liquor licences, sometimes over 10; and, second, many jurisdictions exhibit complex and tiered fee structures ranging into the tens of thousands of dollars. Based on these findings, we make three recommendations. First, Australian states and territories should seek to streamline the number of licence types to the minimum viable level. A wide range of different licence types acts to increase business uncertainty and thereby compliance costs. We see no logical reason that some states would require 13 different licences, for instance.

Our second recommendation stems from the fact that many jurisdictions are characterised by excessive and complex liquor licence fee structures. The fees for application and renewal of liquor licences are progressively tiered from the cheapest to the most expensive licence, based on factors such as venue capacity and patron numbers. Some states even apply complex multipliers based on these factors. We recommend the structure of the licence fee system across Australia be flattened. By ‘flattened’, we mean: to reduce the difference between the lowest and the highest licence fee. There is no clear reason why the current fee structure is tiered, apart from the chance to raise more government revenue.

Our final recommendations concern licensing more broadly. We recommend that all Australian jurisdictions shift their regulatory resources away from licensing, first towards enforcing the basic principles of the regulation of liquor on operating businesses. That is to say, we should proceed by enforcing defections from agreed, simple laws, rather than increasing the red tape and compliance burden, which collectively impacts all businesses. Indeed, this broad principle, if applied to many Australian industries, would help ameliorate Australia’s growing red tape problem. Thank you for your time. We welcome any questions you may have.

Opening statement to Commonwealth Parliamentary Joint Committee on Human Rights inquiry into Freedom of speech in Australia

With Simon Breheny

Freedom of speech is a basic Australian value. A survey, commissioned by the Institute of Public Affairs and released today, finds that 95 per cent of Australians say freedom of speech is important and 57 per cent say it is very important. If you would like copies of that poll, it is available here today. Australia’s commitment to freedom of speech makes this country one of the most diverse, prosperous and socially welcoming on the face of the planet. Laws that undermine free speech put at risk our success story as a socially inclusive and cohesive nation.

Section 18C of the Racial Discrimination Act is one of the most significant restrictions on freedom of speech in this country. Along with the rest of the provisions of part IIA of the Racial Discrimination Act, section 18C ought to be repealed outright. It is an excessive, unnecessary and counterproductive restriction on Australians’ liberties. Alternative proposals for reform would not solve the problems with the legislation that have been identified in particular by recent court cases involving section 18C. In our analysis, simply removing some of the words from the section—or worse, replacing those words with new words—would be ineffective or redundant, or would create even more uncertainty about the scope of the law.

Some participants in this debate argue that freedom of speech is protected by section 18D, but section 18D is a weak and unstable foundation for such an important right. Section 18D has been applied in just three out of more than 70 cases that have been decided by the courts since part IIA was first inserted into the Racial Discrimination Act in 1995. Parliament should not imagine that section 18D provides any certainty about the law. In the QUT case, Judge Jarrett noted a conflict in the authorities about the way in which section 18D might operate.

More fundamentally, section 18D places a burden on the respondent to prove why he or she should have the right to speak freely. This is not a requirement that a free country like Australia should be proud of. A fence is not a moral trump card. Australia is driven by other values, including individual freedom and a democracy. Section 18C harms these values. We urge this committee to recommit to the liberal democratic values that make this country great and to recommend the full repeal of part IIA of the Racial Discrimination Act. Thank you.

Opening statement to Victorian Standing Committee on the Economy and Infrastructure Subcommittee inquiry into ride sourcing services

With Darcy Allen and Aaron Lane

Regulatory decisions surrounding the ridesharing industry are of critical importance to the Victorian economy, because they will set a precedent for the disruption and the potential disruption of the sharing economy more broadly.

The most general principle underpinning our submission today is the idea of permissionless innovation — that is, we believe, a quality regulatory system, one that deals well with disruptive technologies and business models and one that enables innovation by default. In contrast, a permissioned system is one where unnecessary red tape is applied that stifles the potential for entrepreneurs to bring benefits to consumers. Further, we must remain wary of erecting any regulatory barriers today that will prevent the emergence of new business models tomorrow.

It should be a guiding principle that any definitions and new regulations, if they are enacted, should be broad enough so that they do not exclude new organisational and technological forms which may later emerge in the future. A second issue permeating the debates on ride sourcing are the concerns over consumer safety and protection. These legitimate concerns are best examined by asking a deeper question: why do we regulate point-to-point transport in the first place?

The main rationale for regulation of point-to-point transport is to protect and maintain the safety of the public. Government intervention to achieve this goal is largely justified on the basis of asymmetric information — problems between drivers and passengers, where riders lack information about the characteristics of the drivers. Traditional solutions to this market failure are through government regulation. However, enabled by new technologies such as the smart phone and the GPS, these are changing necessary scope of government intervention. They are developing new ways to achieve the safety and consumer protection that Victorians desire and deserve.

Self-regulation of ridesharing has proved remarkably efficient and remarkably effective. For instance, the growth of the reputational mechanisms where drivers and riders rate each other, just as an example, the use of cashless payment systems through ridesharing platforms and the removal of anonymity issues. The implication of this technological progress is that governments must reassess the extent to which imposing state-based regulation is necessary.

A further contentious issue for this committee is the matter of industry transition and the question of compensation. Licences are licences to drive and operate a taxi. They were not invented to be financial instruments. They are not government guarantees of return or guarantees of a certain level of income. The risk of regulatory changes are and should be borne by the licence-holders themselves. Disruption and change is natural. It is a natural state of a vibrant, technologically innovative market economy. Furthermore, compensation hinders the competitive and evolutionary adjustment of a market-based economy.

We at the IPA are concerned about the precedent that compensation sets for future disruption, as taxpayers and consumers might be expected to pay for barriers to economic progress that have been erected in the past. Allowing incumbent industries to seek compensation for technological change is a dangerous door that Parliament should not open.

The IPA believes that new business models which uproot traditional markets, break down industry categories and maximise the use of scarce resources should be welcomed by this committee. Overregulation, however, could suppress this potential economic revolution. Victoria must adopt a deregulatory approach to ridesharing, one that brings down existing barriers without erecting new ones. Such a permissionless innovation approach will make Victoria an attractive jurisdiction to future entrepreneurial endeavours. We thank you very much for the opportunity and welcome the committee’s questions.

Unleashing Prosperity: How to cut red tape on farmers and Australians

Address to the Pastoralists and Graziers Association of Western Australia 2016 Annual Convention, Friday, 2 September 2016 at Crown Perth, Burswood

Australia is a country with enormous potential.

We have some of the most productive and technologically advanced primary industries in the world.

While agriculture is only 2.3 per cent of GDP, Australian agriculture produces enough food to feed 80 million people.

Yet this productivity and potential is being limited by poor public policy settings.

In this speech I’m going to outline the cost and consequences of red tape on Australia’s economy and primary industries – how large the burden of red tape is, how much new red tape is introduced every year and the enormous army of bureaucrats employed to invent, design and enforce it, and how it puts us behind our international competitors like Singapore and the United States.

I’ll then explain how red tape reduction efforts have failed and how they can be revitalised. Red tape can be cut, as it has been in other countries like Canada, Sweden and the Netherlands.

Finally, I want to briefly reflect on the moral consequences of red tape – how it prevents us from achieving the human flourishing that should be the goal of every policy approach.

But I should start with the big picture.

Australian Commonwealth governments have been unable to return their budget to surplus after the dramatic increase in spending by the Rudd government.

We are now spending almost as much as that government did in their extraordinary stimulus ever single year. Expenditure for 2016-17 is projected to be 25.8 per cent of GDP, compared to the 26 per cent of GDP which was spent in the crisis year of 2008-09.

Australia’s gross public debt will soon rise to over 30 per cent of GDP. The Australian government owes its creditors half a trillion dollars. This will have to be paid off by our generation or the next.

Until then, each year we are paying interest on that sum. In 2016-17 the Australian government is expected to pay $12.6 billion in net interest payments alone.

To put that in perspective, this is almost as much as the Western Australian government spends on health and education combined.

The facts I have outlined are well known, if rarely stated in these stark terms. Each government since the Global Financial Crisis has promised to return the budget to surplus and ease the debt burden on the Australian economy, but each government has failed to do so.

The Coalition has been unable to reduce spending to the levels needed to make the budget balance.

Given that spending cuts seem to be off the cards, and the economic consequences of increased taxation would be harmful – there is only one other trigger left that would restore our public finances.

We need to focus on economic growth. Governments need a singular focus on growing the economy out of fiscal mess. If we are to learn to live with big government we need to be able to pay for it.

Growth would return those on unemployment benefits into work. Growth would increase government revenues without increasing the taxation burden on individuals and businesses. Growth would ease the strain on social services, allowing more people to fund their own healthcare and education.

Growth brings about increases in living standards, it brings innovation and technology to yield positive environmental outcomes, and most importantly, growth brings human flourishing – the ability for us to be the individuals, and the society, we want to be.

I’ve given this lengthy introduction to a discussion about red tape and agriculture because it’s vital to understand what Australia’s heavy red tape burden means.

By throwing up barriers to enterprise and development, red tape means a slower economy, less opportunity, lower living standards, and fewer people innovating, creating, and serving their communities.

In the last decade, between the years 2006 to 2016, Australia’s real GDP growth has been just 1.1 per cent per year.

In the IPA’s analysis, the answer to the question of why Australia has not recovered from the Global Financial Crisis as it recovered from the recession of the 1990s or the economic upheaval of the 1970s is over-regulation.

Governments now see their role as interfering in markets and controlling business with red tape and unnecessary regulatory control.

The result is unprecedented legislative hyperactivity whose consequences we are now seeing in slower growth and prosperity.

It took the Commonwealth just 358 pages of legislation to set the federal government up in 1901.

But in 2015 the Commonwealth passed an impressive 6,453 pages of legislation.

That doesn’t include all the subordinate legislation – thousands more pages of spiralling rules and regulations governing what businesses must do before they can expand and employ.

Nor does it include all the state legislation its subordinate legislation. Or the local government bylaws and requirements. Or what political scientists call quasi-regulation: the codes of practice, standards, and requirements that are imposed by industry bodies on the government’s behalf.

This sheer volume of legislative activity is itself damaging.

The constant revision of rules and regulations means businesses have to dedicate resources to monitoring and interpreting the whims of parliament and a growing number of regulatory agencies.

By our count there are 497 bureaucratic bodies involved in the design, implementation and enforcement of red tape at the Commonwealth level alone.

Businesses are used to the uncertainty of market competition – the shifting winds of the global economy, changing exchange rates, the preferences of consumers – but we are increasingly asking them to be political soothsayers as well – to monitor and predict the whims of the political class.

We should not underestimate the uncertainty this brings about.

Economic certainty and the rule of law, thought Fredrich Hayek, was the bedrock of Western economic growth.

Uncertainty about current or future red tape makes it risky to invest, employ and to grow.

The consequences of red tape and uncertainty are being felt across the economy.

For all the enormous innovation and technology that drives our living standards forward, on a number of traditional indicators the Australian economy is less dynamic than it has been in the past.

Fewer new businesses are being created now than they were ten years ago.

The Australian Bureau of Statistics says the number of new businesses that enter the economy each year has plummeted from 17.4 per cent of all businesses to 13.4 per cent of all businesses between 2003 and 2015.

How many potential firms have we lost in the last decade because Australia’s red tape has been seen as unattractively burdensome, or the future regulatory environment to unstable or uncertain?

The Commonwealth government estimates that red tape imposed by the federal government costs the Australian economy $65 billion a year.

Commonwealth public servants use a range of techniques to come to that estimate, such as surveying regulated firms to find out how much time they spend on complying with paperwork and bureaucracy.

But the amount of time filling out forms is only a tiny sliver of the burden of red tape.

Red tape does more than impose paperwork – it slows and reduces investment, it distracts businesses from more profitable endeavours.

Earlier this year the Institute of Public Affairs came to a new calculation of the burden of red tape on the Australian economy.

We did so by looking at the relationship between the World Bank’s “regulatory quality index” and real GDP per capita using a method developed by two American economists in 2014.

We find that red tape costs a massive $176 billion to the Australian economy.

Let’s just pause for a moment and look at what that means.

It means that the government’s best estimate has underestimated the burden of red tape by more than $100 billion.

It means that the red tape burden constitutes 11 per cent of Australia’s GDP.

It means that the red tape burden is larger than any other Australian industry.

It means that red tape costs each Australian household on average $19,300 a year.

And, fundamentally, it means that red tape is the single largest burden on the Australian economy.

While Australia tends to do very well in many global comparisons of government stability and corruption, the World Economic Forum has found that we are in the bottom half of the world when it comes to business perceptions of the burden of government regulation.

This means that Australia has a heavier perceived burden of regulation than Singapore, China, Canada, the United States, and New Zealand – that is, those countries with which we compete.

Each individual permit, licence, or government approval looks trivial and minor when it is first introduced, but they add up.

The Australian Business Licence Register lists more than 30,000 licences across the country.

The Roy Hill iron ore mine required more than 4,000 separate licences, approvals and permits in its pre-construction phase alone. Many more have been required for production and operation.

A recent Deloitte report suggested nearly 10 per cent of the mining workforce is dedicated solely to regulatory compliance.

The Consolidated Pastoral Company has estimated that it is required to comply with more than 300 pieces of legislation, regulations and codes.

But red tape hurts small businesses even more than large businesses.

The Australian Chamber of Commerce and Industry has found that 47 per cent of small and medium businesses in Australia were prevented from making changes to grow their business from the weight of red tape.

Large firms can dedicate the resources to monitoring and complying with regulation. They can hire lawyers and economists and consulting firms.

A small business with less than 20 people typically has to rely on its owner-manager to do this work. Not only will this person lack the training and specialised knowledge required, but every moment spent on regulatory compliance is a moment not spent on innovating, adapting and adjusting to the demands of the market and clients.

A 2013 survey by the Australian Institute of Company Directors found that red tape and workplace relations regulation were second only to general economic conditions as barriers to productivity growth.

But the 2016 election was the first election in recent memory that neither party offered a significant red tape reduction plan.

In 1996 John Howard promised to halve the red tape enveloping small business.

In 2007 Kevin Rudd declared that red tape was eating away at the enterprising spirit of small business. The Rudd government established the Commonwealth’s first minister of deregulation.

In 2013 Tony Abbott promised to cut $1 billion worth of red and green tape a year.

But in 2016 the only notable mention of red tape was buried in page 19 of the Coalition government’s National Economic Plan, with a promise not of reducing red tape but of spending $5.6 million to “systematically review regulatory regimes”.

The Abbott-era red tape reduction programs – like the special parliamentary sitting days dedicated to repealing legislation – were quietly cancelled earlier this year.

This is, to be fair, not due to any lack of political will.

Many of the red tape reduction policies were stymied by the Senate. For example, the government was unable to reform – not abolish – the government’s workplace gender reporting requirements.

The requirements are the definition of red tape. The require firms with 100 employees or more to report to the government the gender composition of their staff, pay rates for men and women, and flexible working arrangements.

The government does nothing more than collect this information – it imposes no obligation on firms to do anything differently.

Gender reporting requirements are both intrusive and pointless.

But the government withdrew the changes when it learned how much of a backlash awaited it.

Likewise, modest changes to the regulation of financial advisors to avoid some of the perverse and unintended consequences of increased regulation under the Labor government, were rejected by the Senate.

Politics is not the only barrier to red tape reform.

As the Abbott government found, the public service itself has an obvious interest in maintaining its grip over the Australian economy.

In July this year the Canberra Times reported that the Coalition’s policy to link senior public servant bonuses to red tape reductions – effectively a pay for performance measure for deregulation – had been ignored and refused by those public servants who were supposed to implement it.

Last month the Productivity Commission released its draft report into the regulation of agriculture. The commission’s found that agriculture was subject to a “vast and complex array” of regulation and red tape, that affects every part of the supply chain.

That red tape emanates from state, local and federal governments and frequently duplicates regulation imposed by other levels of government.

Red tape delays the construction of dams, delays innovative new uses of land, and delays the introduction of new technologies like drones.

I’d like to briefly focus on one of the commission’s recommendations that illustrates clearly the opportunities and challenges for red tape reduction.

The PC found that native vegetation controls harm productivity, are complex and costly, and duplicated across state and federal governments.

Rigorously adhering to the requirements of state legislation is no guarantee that the federal government will not override that compliance and impose new costs and controls on a landholder.

These native vegetation rules extort landholders and users on the basis of often vexatious claims about biodiversity.

The commission recommended that state and Commonwealth governments adopt more market-based approaches to protecting native vegetation.

To understand why markets would be better for the environment its worth briefly describing the perverse incentives created by native vegetation regulations.

Economists describe property rights as a “bundle of rights” – that is, a bundle of rights to use, exploit, inhabit and sell land.

When the government imposes control on the use and exploitation of privately held land they are effectively seizing part of the property rights without compensation to the landowners.

From the government’s perspective, it costs nothing to prohibit people from clearing land for their use.

They have every incentive to prohibit more and more – particularly if they are driven, as many environmental bureaucrats are, by a deep ideological hostility towards our primary resources sector.

The Australian Conservation Foundation’s Andrew Piccone last month described “big cattle, big agriculture and big mining” as “the marginal and unimaginative industries of last century” and a threat to prosperity.

Market based approaches to native vegetation protection are designed to fix this incentive problem.

Governments should have to pay for the land they lock up – to compensate landowners for the property rights which have been taken and to fund the upkeep of that now undevelopable land.

If the Australian community wants to prohibit development it should be asked to pay for the cost of that prohibition – not to fob responsibility onto landowners who suddenly find themselves poorer.

But market based alternatives to red tape are a hard sell because so much red tape is designed not to control economic activity but to prevent it.

The complexity and cost of so much red tape is no accident – it is driven by political opposition to the primary industries that have underpinned our prosperity.

To understand that much red tape is in fact designed to prevent economic activity is to understand why reducing it is so challenging – the special interests who oppose development and growth do not see red tape as merely consisting in form filling or compliance activity, but a tool to stop economic activity.

The government’s demand that it approve development is, clearly, the government’s insistence of the right to deny development.

With this in mind, how can we reduce red tape?

There is an enormous political interest in red tape reduction, and a growing recognition that red tape is the single largest constraint on Australia’s prosperity.

But we have surprisingly little information about exactly how much red tape there is on the books.

All the political goodwill in the world is not enough – governments which promise to reduce red tape need to be held accountable. Ministers who want their departments to reduce red tape need to know that the job is being done, not evaded.

The In most successful red tape reduction in recent history was done by the Canadian province of British Columbia, which has managed to shrink its red tape burden by nearly 50 per cent between 2001 and 2015.

British Columbia’s economic performance relative to other Canadian provinces jumped from one of the lowest performing to one of the best.

The key to the British Columbia success was verifiability. In recent decades bureaucracies have been encouraged to calculate a total cost of the burden of individual regulations on business. But these calculations are crude and can be easily gamed by bureaucracies and self-interested politicians.

Instead the government of British Columbia counted the number of “regulatory requirements” imposed by law – the commands from government that forms need to be filled out, permits need to be obtained, committees need to be formed, and so forth.

In 2001 British Columbia had 330,812 of these requirements. As of March 2016, the regulatory requirement count was down to 173,419.

Under their rules, no new regulation can be introduced without removing an old one. At one stage the government imposed a one-in, five-out rule.

This is the “trust, but verify” approach. We need to be able to see red tape being reduced.

Clear and unambiguous reductions in red tape boost business confidence and the willingness of firms to invest in Australia.

But the real lesson I want you to take from this is the simple fact that red tape can be reduced. It is easy to be cynical about red tape reduction, considering we have had two decades of underwhelming attempts to do so. But other countries and jurisdictions have managed to cut red tape, cut it deeply, and are better off as a result.

It requires a political willingness to commit – and to be seen to commit – to genuine reform, underpinning by a deep understanding of the harm that red tape is causing to the Australian economy, to Australian jobs, and to Australian prosperity.

We are in a point in history where alternatives to regulation and the old way of doing business are thriving – changes caused by technology, by education, and a highly specialised and open market.

To fully exploit these changes into higher living standards we need to cut the red tape that was designed for earlier eras, and prevent governments from adding more.

But I’d like to finish with a brief reflection on the deeper harm that red tape does to us as a society and as individuals.

That is, the moral consequences of red tape.

When the government imposes red tape on our economic activities, on the businesses we create, on the people we seek to employ, on the goods and services we deliver to the community, it is asserting a control that is deeply paternalistic and disempowering.

It is a claim that governments know better than their citizens about how to care for the environment, how to develop a safe and effective workforce, how to run machinery, how to move goods between two points on a map, what employment conditions are more fair, who should be able to practice a profession.

It elevates the preferences of bureaucrats over the people they are supposed to work for.

And it does so at the expense of the economic growth Australia’s economy desperately needs.

It is no exaggeration to say that red tape is the most fundamental challenge that faces the Australian economy. We believe that the public understands this. But our job now is to convince the political class to do something about it – to cut red tape and unleash Australian prosperity.

Opening statement to Commonwealth Environment and Communications Legislation Committee inquiry into the Broadcasting Legislation Amendment (Media Reform) Bill 2016

The 75 per cent audience reach rule and the two-out-of-three rule are historical anachronisms that should be abolished. They are nonsensical in an age of media plenty rather than scarcity. However, this discussion ought to spur more radical and forward-looking reform. For the last decade we have discussed in more or less theoretical terms the coming technological revolution in media production and consumption. With streaming services like Netflix, Stan and Presto, news sites like Guardian Australian, the Huffington Post Australia and so forth, as well as the shift in media consumption across to social media, which is arguably more important, these predictions have come to fruition; yet ownership restrictions, with their focus on legacy media organisations, assume a world of scarcity where consumers are forced to rely on content produced by just a few outlets. It is important to note, of course, that historically much of the scarcity in the Australian media landscape has been deliberately engineered to protect large media firms from competition, so claims that we have had to protect Australians from monopolists in the broadcast media with ownership controls have always been somewhat disingenuous.

I would like to make a few points, however, about media diversity in this light. The relationship between ownership diversity and content diversity is non-linear. Parliament might act on one without necessarily changing anything about the other. Given the plentiful media choice we enjoy today, there is a more fundamental conceptual issue, however, that the Senate ought to grapple with when it considers questions of ownership and diversity—that is, the distinction between diversity of availability and diversity of choice. There ought to be no disagreement that a plurality of voices is available to Australian media consumers. There is a near-infinite range of news and views distributed via the internet—and, again, the effect of social media should be front of mind here—but it is often claimed that, despite this choice, many Australians still only listen to a few radio stations, read a few newspapers and watch a small slice of mainstream television, uninterested in the amazing media things going on around them. If this is the real problem consuming parliament’s attention then senators should realise that they are adopting an approach which is fundamentally paternalistic, asserting that despite the best efforts of entrepreneurs and independent producers Australians are still watching the wrong things and policy is needed to change that.

I would like to make two final observations: first, it is not the responsibility of the Australian government, nor Australian taxpayers, to find new business models to support legacy media; second, any consideration of regulatory changes should be assessed in the context of the media landscape as a whole, including some consideration of the policy purposes of the more than $1 billion we spend on the ABC. These reforms before parliament are, in our view, very welcome, but the hard work of reforming Australian media regulation to adjust to this new world, which would include things like structural changes to spectrum allocation, the elimination of red tape like antisiphoning laws and content standards, unfortunately has not begun.

Opening statement to Commonwealth Select Committee on the Social, economic and environmental impacts of the Murray-Darling Basin Plan on regional communities

With Sinclair Davidson and Scott Hargreaves

The Murray Darling Basin Authority appears to be immensely proud of the fact that the Murray Darling Basin Plan was endorsed in the House of Representatives by 95 votes to 5, and argues this shows the plan “balances the competing interests” of usage of the basin.

However, this committee has heard a great deal about the negative impacts of the Plan.

As our colleague Dr Jennifer Marohasy pointed out to the committee, dramatic improvements in environmental outcomes could be achieved through restoration of the Murray River’s estuary. Letting the Lower Lakes fill with seawater during periods of drought could save approximately 900 gigalitres of freshwater per year in evaporation losses alone.

While we do not propose to address that issue today, what it does suggest is that an adaptive approach to the plan which only has room for incremental changes risks locking in poor outcomes.

We recommend the Productivity Commission immediately be commissioned to conduct a full cost-benefit analysis of the Murray Darling Basin plan with the knowledge that has been gained through this inquiry and the implementation of the plan so far.

A cost-benefit analysis that assesses alternative policy settlements, such as estuary restoration, would also clarify the opportunity costs of policy choices foregone.

It is the case that the Water Act requires the Productivity Commission to conduct an inquiry into “the matter of the effectiveness of the implementation of the Basin Plan and the water resource plans”, which the MDBA describes as an “audit”.

This is inadequate. Rather than an implementation assessment occurring five years into a seven year plan, the Productivity Commission should have been tasked to inquire every three years during the implementation phase, and to study not only into process, but the purpose of the plan.

Furthermore, the Productivity Commission should be enabled to constantly monitor the progress and efficacy of the plan, as well as alternative approaches. Only an external body would have the required objectivity to conduct cost benefit reassessments.

A final word about the scope of cost-benefit analysis. The 2012 Regulatory Impact Statement argued that “Many environmental benefits [of the plan] can only be expressed in biophysical/ecological terms, rather than in monetary terms”.

We do not accept that argument. Value is created through human action, and can only be appreciated on a human scale. In this context there is something we could label as “conservation value”. There is an opportunity cost to not using resources that may otherwise be used. There is an option value associated with maintaining biodiversity, even if we have no intention of exchanging an asset or selling it.

These values can be estimated. We might debate how well they are estimated but this sort of thing can be done and is done on a regular basis.

Undefined and incomparable environmental benefits should not be used as a policy trump card.

Just because a benefit cannot be measured with precision does not mean it has infinite value. An upper or lower estimate of the benefit, translated into monetary terms, is necessary to understand policy choices.

This is the approach we recommend the Productivity Commission take.

Opening statement to Commonwealth Economics References Committee inquiry into Personal choice and community impacts

With Simon Breheny

It is the view of the Institute of Public Affairs that paternalism is an unstable and illiberal basis for public policy. What do we mean by ‘paternalism’? It is important to be conceptually clear, because many policies have, rightly or wrongly, been lumped under the phrase ‘nanny state’. John Kleinig defines paternalism as when ‘X acts to diminish Y’s freedom, to the end that Y’s good may be secured’. That is, an outside person—in this case, the government—prevents you from doing something that you want to do and does so in your own benefit.

Today I am going to make three arguments about paternalism. The first is that paternalism has a long history. The belief that the state should control people for their own good is arguably the oldest political philosophy. But modern paternalism leans heavily on the findings of behavioural economics, which can be summed up simply as ‘people often make bad choices’. Under this argument, we are irrational: we underestimate risk, we employ wishful thinking, we discount information that conflicts with our beliefs. Many of these cognitive errors are predictable. Paternalism therefore uses the state to remedy or mollify them. In our view, this argument for paternalism is distinctly one-sided. Policy makers are as susceptible to the cognitive errors that are commonly attributed to consumers. Policy makers deploy heuristics. They also search for evidence to confirm their beliefs, and they are biased towards action in the face of unknown risk. Behavioural economics should make us more sceptical about paternalism than we previously were. Paternalist intervention should be seen as a trade-off between error-ridden consumers and error-ridden policy makers.

My second point concerns ignorance. Values are subjective, and it is a non-trivial task to determine people’s best preferences. Not everybody shares the same tolerance of risk. Some people prefer hedonism to health. Policy makers cannot assume that they are acting on behalf of people’s best interests when those interests are diverse and even unknowable. In their book Nudge, Cass Sunstein and Richard Thaler try to deal with the subjection by asking people what they would prefer in retrospect—that is, by asking people whether their past decisions were correct according to their own values. This way, they can try to divine people’s true or unbiased preferences. Unsurprisingly, people regret a lot of their choices. But it is not clear why retrospective preferences are more true than current ones. Why should our future selves have a veto over our current selves? After all, not all regret is rational, and our future selves are subject to cognitive error as well.

The final point I would like to make today is that paternalism is fundamentally undemocratic. Paternalism treats citizens like subordinates. The paternalist’s model of irrational individual choice is starkly at odds with the democratic philosophy of individual choice. We all believe as democrats that adult Australians have a moral right to make political decisions. We believe that Australian citizens have the minimum level of rationality and autonomy to choose who to vote for, which is one of the most informationally intensive decisions an individual is asked to make. My argument is that we are exactly as rational in the voting booth as we are in the supermarket; the voter is the same as the consumer. So, what are elected policy makers suggesting when they argue that their electors are incapable of making consumption decisions without the help of bureaucrats? Or, more fundamentally, what right do elected policy makers who derive their political legitimacy from that free and competent vote have to turn around and inform the voters that they are unable to make decisions about what they eat, drink and consume?

Opening statement to Commonwealth Legal and Constitutional Affairs Legislation Committee inquiry into the Copyright Amendment (Online Infringement) Bill 2015

Copyright is a limited quasi-monopoly privilege granted by the state to authors of creative works for a specific and utilitarian purpose, which is to encourage the development of new creative works. This, in my view, is the proper frame in which to consider any changes to copyright law or any new mechanisms to control copyright infringement such as are proposed in the Copyright Amendment (Online Infringement) Bill. To what extent will changes in the law encourage or discourage the creation of new works?

Parliament has a complicated balancing act to perform. Copyright, after all, is not socially costless. It constrains what we might be able to do otherwise with our own property. It prevents us from exercising rights to how we might use our printing presses, musical and television equipment, computers or internet connections. This is not at all to say that the copyright privilege is unjustified or unjustifiable—far from it—but that the utilitarian calculation that society needs to make when considering copyright is whether the benefits of any marginal changes to these privileges outweigh the costs to more fundamental rights like freedom of expression and the right for individuals to use their property and possessions as they see fit. This is why the Howard government’s 2000 Ergas report into intellectual property argued:

Over-compensating rights owners is as harmful, and perhaps even more harmful, than under-compensating them.

Quite apart from any freedom of expression concerns with the copyright bill before parliament, it is not at all clear to me that the social benefits conferred by this new censorship power to block access to websites outweigh the social costs. The Institute of Public Affairs has an in-principle objection to internet censorship on free speech grounds, which I think by now most people will be familiar with, but there is a specific issue I want to raise in the context of this bill.

The bill dramatically lowers the bar for which internet censorship is being proposed. After all, while the previous government’s internet filter proposed to block websites that were hosting violent pornography, child abuse material and so forth, the bill before parliament today proposes censorship on the basis that some websites host copyrighted content. The two censorship proposals are hardly the same scale and, in the case of copyright infringement, we are actually talking about a civil rather than a criminal wrong. The language in the bill is excessively vague. Other submissions have pointed to the undefined and broad consequences, for instance, of the word ‘facilitate’ and warned of possible judicial creep. But I would like to make a final observation.

Parliament, and the political process, is not a venue well-designed to calculate dispassionately the most efficient level of copyright privileges and the most efficient changes to enforcement mechanisms. This is a well-known collective choice issue. It may be possible to draw blackboard diagrams that determine the ultimate copyright rules and level of enforcement. However, unfortunately, policymakers lack the necessary information to do so. Copyright law therefore suffers from what Friedrich Hayek famously called the ‘knowledge problem’. That problem, in our view, presents a strong presumption against further increases in the copyright enforcement powers and an absolute presumption against internet censorship for copyright purposes.