There is a tax that does not appear in the federal budget. It is not collected by the ATO. It does not show up in Treasury modelling. But it is paid every day by every business operating in Australia — in time, in money, in foregone investment, and in decisions made to not hire, not expand, and not start.
It is the cost of regulation. And in Australia, that cost is among the highest in the developed world.
What the OECD data shows:
The OECD's Product Market Regulation (PMR) indicators measure the extent to which government policies restrict competition and create barriers to business activity. Australia's PMR score has consistently ranked in the bottom quartile of OECD nations on barriers to entrepreneurship — the category that most directly measures administrative burden on businesses seeking to start, operate, and grow.
The Fraser Institute's Economic Freedom of the World index has tracked a sustained decline in Australia's regulatory freedom score over fifteen years. In 2010, Australia ranked 4th globally. By 2024, it had fallen to 18th — not because other countries deteriorated, but because Australia did.
The productivity collapse:
- Multifactor productivity growth, 2003–2013: 1.1% per year
- Multifactor productivity growth, 2013–2023: 0.1% per year
- Australia's productivity ranking among OECD nations: fallen from top quartile to bottom half
- Productivity Commission assessment: regulatory accumulation identified as primary structural contributor
The Productivity Commission's 2023 five-year review found that regulatory accumulation — the layering of new regulations on top of existing ones without systematic review or removal — has created compliance costs that fall disproportionately on small and medium enterprises, reduce competitive entry, and suppress investment in productivity-enhancing capital.
The housing cost link:
A small construction business in New South Wales is subject to federal workplace health and safety legislation, state planning laws, local council development approval processes, federal environmental assessment requirements, state heritage requirements, federal building code standards, state licensing requirements for trades, federal employment law, state workers' compensation schemes, and local infrastructure contribution levies.
The Housing Industry Association estimates this regulatory layering adds between $40,000 and $120,000 to the cost of a new dwelling in major Australian cities — before a single brick is laid. This is not a supply problem. It is a regulatory cost problem embedded in every unit of housing supply.
The occupational licensing explosion:
- Workers requiring a government licence to practise their occupation, 1970: approximately 5%
- Workers requiring a government licence to practise their occupation, 2024: approximately 27%
- Australia's occupational licensing rate vs. comparable OECD nations: highest
- Productivity Commission finding: many licensing requirements have no demonstrable relationship to consumer protection outcomes
The cost of living connection:
The Grattan Institute's 2023 analysis identified regulatory costs as a structural contributor to price levels in housing, childcare, healthcare, and professional services — four of the five largest categories of household expenditure. Its central estimate: regulatory reform in these sectors alone could reduce household costs by between $3,000 and $8,000 per year for a median Australian household.
Who bears the burden:
Regulatory burden is a regressive tax. Large corporations have compliance departments, legal teams, and the scale to absorb regulatory costs across large revenue bases. For a sole trader tradesperson, licensing fees, insurance requirements, and compliance reporting can consume a material share of annual income. For a migrant worker seeking to have overseas qualifications recognised, the licensing and assessment process can take years and cost thousands of dollars.
Established industries have strong incentives to support licensing requirements that raise barriers to entry for competitors. They have the resources to participate in regulatory consultations. New entrants and small operators do not. This is regulatory capture — and it operates continuously, invisibly, and at the direct expense of consumers and workers.
What both parties have failed to do:
The federal government's own Regulatory Burden Measurement framework shows that the net regulatory burden on Australian businesses has increased in every year since the framework was established — under both Coalition and Labor governments.
The Productivity Commission has recommended, in multiple reviews, establishing an independent regulatory review function with the power to require sunset clauses on new regulations, mandate cost-benefit analysis for all significant regulatory proposals, and systematically review the existing stock of regulation for redundancy and overlap. This recommendation has not been implemented by any government.