March 19, 2026

Growing awareness of the cost of regulation

At our recent Challenger Seminar Series event, Adopting a Growth Mindset – The Role of the Public Sector in Lifting Productivity, Danielle Wood, Chair of the Australian Productivity Commission, led a thought-provoking discussion on the public sector’s role in driving productivity and tackling complex policy challenges. The event also sparked broader reflections on what a growth mindset looks like when approaching policy decisions and the cost of regulation and its impact on achieving better community outcomes.

Over recent months numerous reports have highlighted the importance of well-designed regulation and the consequences of regulatory settings being out of balance.

New evidence from Organisation for Economic Co-operation and Development (OECD), Time for a Regulatory Reset, has linked the growing stock of regulation and specific regulatory features to weaker productivity growth and economic dynamism.

The OECD’s 2026 Economic Survey of Australia and Australian Productivity Commission’s Creating a More Dynamic and Resilient Economy report have also highlighted that Australia lags behind on key international indicators of regulatory burden. According to both reports, Australia’s regulatory requirements and barriers to competition are comparatively higher than other developed countries. For example, Australia fell from 5th to 14th in the World Bank’s Ease of Doing Business Index between 2005 and 2020, while according to the OECD’s Product Market Regulation Index, Australia now ranks 16th (down from a high of 3rd in 2003).

In 2025, the Australian Institute of Company Directors engaged Mandala Partners, who estimated the cost of compliance with Australian Government regulation at $160 billion in 2024, around 5.8 per cent of GDP, up from 4.2 per cent in 2013. According to the Business Chamber Queensland Efficient Regulation Report 2025, 82 per cent of surveyed Queensland businesses said regulation inhibited their growth and productivity. Firms surveyed by the Reserve Bank of Australia have also reported the load and complexity of regulation has diverted staff away from their core business activities and is a key factor weighing on their labour productivity growth over the past five years.

At an industry level, the Queensland Productivity Commission’s recent report on the Queensland construction industry found that labour productivity had grown only 5 per cent in the last 30 years, with complex regulation playing a significant contributing role.

Improving regulation
Regulation has both benefits and costs

Regulation is critical for ensuring markets work efficiently and for delivering better outcomes for the community. This includes measures to protect worker and public safety and safeguard consumers from poor quality products or services.

However, regulations are rarely free from costs, including compliance and administrative burdens on individuals, business and government. Regulations (and how they are applied by regulators) can also over time become outdated, overly rigid, or ineffective in addressing the problems they were originally meant to address. All of this can lead to barriers to the entry of new businesses, less competition, lower productivity, higher prices and a reduction in the variety and quality of products offered to consumers.

As noted by these recent reports, the costs of poorly scoped or implemented regulation can be significant, especially when considered at a whole of economy level (that is, through cumulative impact).

The policy challenge is to strike the right balance, by designing regulation that achieves a net public benefit, where important social, economic and environmental objectives are met while minimising the cost of regulation imposed on the community.

Steps to encourage better regulation

In Queensland, the Queensland Government Better Regulation Policy (the Policy) helps ensure new regulations are necessary, fit for purpose and designed to avoid unnecessary burden on affected stakeholders. The Policy sets out a structured process for developing or reviewing regulation based on seven key questions:

  1. What is the problem or issue the government is trying to address? (problem identification)
  2. Is government action needed and, if so, why? (case for government action)
  3. If government intervention is necessary, what feasible policy options (regulatory and non-regulatory) could address the problem? (identify policy options)
  4. What are the potential net impacts (costs and benefits) of each option? (impact analysis)
  5. Which option most effectively addresses the problem and has the greatest net benefit?
  6. How should the preferred option be implemented and its effectiveness evaluated? (implementation and evaluation)
  7. Who was consulted and what was their feedback? (consultation).
Where to go for assistance

The Office of Best Practice Regulation (the OBPR), within the re-established Queensland Productivity Commission (QPC), offers advice, analytical support, training and resources to help Queensland public sector officers develop and review regulation.

If you’re on the front line of developing and reviewing regulation, the QPC’s resources and training program can help.

For further information, including information on the QPC’s 2026 training program, visit: www.qpc.qld.gov.au.

Referenced publications
  1. OECD (2025) OECD Economic Outlook, Volume 2025 Issue 2: Resilient Growth but with Increasing Fragilities, OECD Publishing, Paris, https://doi.org/10.1787/9f653ca1-en.
  2. OECD (2026) OECD Economic Surveys: Australia 2026, OECD Publishing, Paris, https://doi.org/10.1787/d22a1efd-en.
  3. Productivity Commission (2025) Creating a More Dynamic and Resilient Economy, Inquiry Report no. 109, Canberra.
  4. Mandala (2025) $160 billion and counting: The Cost of Commonwealth Regulatory Complexity, A Report prepared for the Australian Institute of Company Directors.
  5. Business Chamber Queensland (2025) Efficient Regulation Report 2025 – Measuring the Red Tape Burden on Queensland Business
  6. Reserve Bank of Australia (2025) Technology Investment and AI: What Are Firms Telling Us?, Bulletin, November.
  7. Queensland Productivity Commission (2025) Opportunities to Improve Productivity of the Construction Industry: Final Report.
  8. Queensland Treasury (2025) The Queensland Government Better Regulation Policy.