Productivity Commission chair, Danielle Wood, explains how Australia’s regulatory burden is stifling productivity and the urgent need to reduce business compliance.
Since 2015, average annual productivity growth has been about one quarter of its long-run average.
There are many explanations for our stalling productivity.
A survey of company directors found that in 2025, boards were spending 55% of their time on compliance – up from 24% 10 years ago. That means more time on box ticking and less time contemplating strategy, technology rollouts or major investments.
We see the same trend in the number of restrictive clauses in legislation.
When we asked businesses about their biggest issues for the productivity inquiries we undertook last year, regulatory burden came up more than any other.
When something goes wrong, governments face immense and immediate pressure to serve up a response in the media and parliament. We want to know why it happened and how we can stop it happening again.
In the heat of the moment, it is very hard to admit that sometimes bad things happen, or even that a good policy response will take time. We demand action: a new reporting requirement, screening check, procedure or safeguard.
Regulators have always had to balance the goal of lower prices with the need to maintain sufficient incentives for new investment.
One way this plays out is in a cautious approach to new technology.
Prefabricated construction methods, which can speed up the process of building new homes, are a good example. With prefab construction, components can be manufactured offsite, rain, hail or shine. And tradies can work on multiple units at a time at the one location, cutting timeframes substantially.
But uptake is very low – less than 5% across all construction.
There’s no explicit provision in the National Construction Code that bans prefab, but the code was designed for onsite construction.
Some requirements – such as checking individual components – are difficult with prefab pods that are installed onsite as complete units. And then there’s the cultural piece – regulators and building certifiers across jurisdictions vary in their conservatism and acceptance of prefab.
It makes sense. When the priority is guaranteeing that nothing goes wrong, every new technology – no matter how big the upsides for others– looks an awful lot like a downside risk to a regulator.
Governments are tackling this issue now, but it has arguably slowed the scale-up of a sector that will be an important part of meeting our housing supply challenge.
Another consequence of this ‘nothing can go wrong’ mindset is the creep of stakeholder engagement and consultation processes.
The inclusion of consumer and broader stakeholder voices in key regulatory decisions has been one of the positive developments in regulation over the past two decades.
But over time, the scope and expectations of stakeholder engagement have grown.
These processes can’t avoid the fundamental truth: doing big things usually involves pissing someone off. Even with the best process, there’s no guarantee of consensus.
As regulators and policy makers, we need to face up to those trade-offs – not hide in the shadow of the consultation report.
Embracing innovation can be another powerful tool. I’m excited about the potential of AI to speed up regulatory processes across government.
Embracing these types of innovations involves a leap of faith. There’s always an element of risk in trying something new or sharing oversight. But that’s where the mindset shift comes in.
Unshackling business and making it easier to build and innovate is the only way to ensure that we deliver better outcomes for the next generation. And that I think is worth taking a few risks for.
about the author
Danielle Wood commenced a five-year term as chair of the Productivity Commission in November 2023.
Prior to joining the Commission, she was CEO of the Grattan Institute and head of its Budgets and Government Program.
Danielle holds an Honours degree in Economics from the University of Adelaide and two Masters degrees, one in Economics and one in Competition Law, from the University of Melbourne.