Productivity through a pandemic – White Paper proposes regulatory reform to reboot NSW economy

The NSW Productivity Commissioner recently released the Productivity Commission White Paper 2021, Rebooting the economy, which sets out a new productivity reform agenda aimed at rebooting NSW's economic growth. The White Paper presents final recommendations to the NSW Government, drawing from public consultation and feedback outlined in the Continuing the Productivity Conversation Green Paper 2020, to identify some 60 opportunities to reboot NSW's economy following the impact of the COVID-19 pandemic.

The Productivity Commission predicts that these reforms will offer significant benefits to the NSW economy, including boosting gross state product (GSP) by 2% p.a. by 2041 – an increase of A$19.4 billion. This means that GSP per capita may be lifted by 1.7% which is the equivalent of each NSW citizen, aged above 15, receiving an additional A$2,000.

The recommendations centre on four key areas: 

1. Talent: Supporting a skilled and high performing workplace.
2. Innovation: Enabling new technologies and processes to achieve outcomes.
3. Housing: Improving housing choice and affordability.
4. Infrastructure: Smarter use of infrastructure and natural resources.

While the White Paper was drafted for NSW, it is likely to prompt other reform-ambitious governments to take action and adopt regulatory reforms aimed at enhancing productivity.

Why the regulatory focus?

As discussed in our articles Telegram! NSW looking to future-proof regulatory frameworks to enhance productivity and Hindsight is 2020, foresight is 2040: the NSW Government's plan to future-proof the State, the NSW Government has increasingly turned its focus towards reforming regulatory frameworks to keep up with modern trends and reduce the burden and inefficiency of regulatory compliance and overlap.

This regulatory focus comes at a vital time for NSW which, despite recovering relatively well from the global economic fallout of the COVID-19 pandemic, continues to manage the impacts of COVID-19, as well as recovering from the 2020 summer bushfires and recent flooding. In particular, the pandemic highlighted the importance of improving regulations to adapt to rapid change. One example that illustrates this is the government's swift implementation of public health orders last year to maintain essential services and social distancing which, along with other factors, allowed NSW (and Australia more broadly) to minimise the spread of COVID-19 and its impact to the economy, as compared to its global counterparts.

Currently, the volume of regulation in NSW is growing exponentially with twice as many regulations created between 2010 and 2019 than in the previous decade. While this can be attributed to some societal shifts (for example, the need to regulate new technologies), more regulations also translate to businesses spending more time and money on compliance rather than innovation.

The White Paper outlined two key recommendations in the regulatory space:

Recommendation #1: Improve flexibility to support our pandemic recovery by testing, evaluating and selectively keeping the extended COVID-19 regulatory changes

The White Paper stresses the importance of flexibility in regulation as a key driver of innovation, competition and economic growth in NSW. This flexibility, not only enabled the NSW Government to respond quickly to the COVID-19 crisis (as mentioned above) with temporary regulatory changes by overcoming regulatory obstacles, but is also integral to assisting the State's economic recovery.

(a) Assess and retain COVID-19 regulatory changes

The Productivity Commission recommends that the NSW Government analyse the success of the extended COVID-19 regulatory changes, assess their results and retain them unless it can be shown that there is no net public benefit. The process of evaluation has already begun and is expected to be completed before the end of 2021. Some extended measures include:

• allowing supermarkets and pharmacies to operate 24 hours a day;
• allowing compulsory job interviews and questioning to be conducted by telephone or video conferencing;
• allowing signatures on deeds, affidavits and statutory declarations to be witnessed electronically, as well as digital execution and certification of conveyancing documents;
• more frequent usage of audio and audio-visual link technology in courts, including allowing pre-recorded evidence in criminal trials; and
• giving workers more flexibility to use long service leave.

(b) Automatic mutual recognition

The White Paper also advocates for implementing automatic mutual recognition to improve regulatory flexibility and labour mobility as well as to overcome NSW's skills shortages. Currently, Australian States and Territories operate their own occupational licensing schemes which means that occupational professionals must apply for an equivalent licence or registration to work interstate under the Mutual Recognition Act 1992 (Cth). While mutual recognition has eased the free flow of labour, goods and services between participating Australian States and Territories (and also New Zealand), the Ministerial Declarations that determine the "equivalence" of occupations across jurisdictions are complex and outdated.

To address this, the NSW Premier (alongside all other State Premiers) signed an intergovernmental agreement committing to implement a national automatic mutual recognition (AMR) scheme for occupational registrations by 1 July 2021. This involves the Commonwealth introducing legislation into Parliament to implement AMR, with States and Territories to pass supporting legislation. The purpose of the AMR scheme is to automatically recognise a person's licence or registration in their "home" jurisdiction in a second jurisdiction, so that they can perform the same activities without obtaining permission or paying additional registration fees.

The AMR scheme is expected to allow occupational licensees to take up job opportunities more quickly and easily while bringing down the associated costs of doing so. This is particularly important when a State or Territory suddenly needs a large number of skilled workers, for example, NSW faced an acute shortage in trades required to rebuild structures after the 2020 summer bushfires.

Under the AMR:

• a registered person must still meet requirements designed to protect consumers and the community, for example, in relation to insurance, fidelity funds and trust accounts;
• local laws will apply to interstate registration holders; and
• the scheme will apply automatically to all licensed occupations unless exempt or subject to an existing national registration scheme or State-based automatic recognition scheme.

The Productivity Commission therefore advocates for the continued pursuit of AMR to overcome NSW's skills shortages.

Recommendation #2: Build an adaptable, higher-performance and forward-looking regulatory framework

The White Paper recommends adopting a regulatory stewardship approach to monitoring the effectiveness of regulations, as opposed to the process currently put in place under the Subordinate Legislation Act 1989 (NSW). Under this Act, subordinate legislation is automatically repealed every five years unless they are re-made. One method to improve this is to remove these provisions or extend the lifespan of subordinate legislation from five to ten years.

In contrast, a regulatory stewardship approach would require the custodians of regulations (that is, relevant government agencies) to oversee the ongoing performance of regulations over the regulatory lifestyle. According to the Productivity Commission, this approach will promote a strategic approach to regulation review by allowing agencies to focus on reviewing the regulations and reforms with the greatest impacts on businesses and the community.

Two key actions can drive this approach:

1. Strengthening the evidence underpinning the policy process: Regulatory impact analysis can be improved to better evaluate the costs and benefits of regulations. For example, the White Paper highlights that, according to the Audit Office of NSW, regulatory proposals put to Cabinet do not consistently include well drafted Regulatory Impact Statements that effectively consider the costs associated with reforms. This has led to an estimated loss of A$500 million per year consisting of administrative costs, compliance costs, fees and charges as well as delay costs.
2. Improving the administration of regulation: NSW can incorporate a regulator performance framework into agencies' annual regulatory stewardship strategies, similar to those of Victoria, Queensland and the Commonwealth governments. This framework could allow agencies to report on a range of matters including their operational efficiency in achieving policy outcomes, performance feedback from stakeholders and benchmarking of agencies' performance. For example, the NSW Environment Protection Authority prepares an annual Regulatory Assurance Statement that evaluates its strengths and weaknesses as a regulator using the "Modern Regulator's Improvement Tool" created by the Australasian Environmental Law Enforcement and Regulator's Network.

What's next for NSW?

Business NSW is one organisation that has applauded the Productivity Commission for its recommendations, noting that they were consulted extensively in the preparation of the report and that the White Paper matches their priorities and concerns.

Businesses should consider the benefits that will accrue to them if the recommendations are implemented, and monitor the implementation of those recommendations, so that they are ready to take advantage of them.

As part of the NSW Government's broader reform agenda, businesses should also consider the recently released Intergenerational Report 2021-22, as well as the 2021-2022 NSW Budget handed down earlier this week on their operations and consider opportunities for future growth.

Related Insights

• Telegram! NSW looking to future-proof regulatory frameworks to enhance productivity
• Hindsight is 2020, foresight is 2040: the NSW Government's plan to future-proof the State