Business costs itself billions in internal red tape
Red tape has long been blamed for whittling away company profits in Australia, but global accounting firm Deloitte says internal red tape and self-imposed rules are costing businesses twice as much as government regulations.
Deloitte has put the total cost of compliance for Australia's economy at $250 billion a year.
The Federal Government has embraced demands from business lobbies to do away with rules blamed for holding back Australia's growth.
Today, the Government plans to repeal 1,000 regulations it says do more harm than good. It scrapped another 10,000 federal level rules earlier this year.
However, Chris Richardson from Deloitte Access Economics told AM that businesses need to take a closer look at their own rule books.
"A lot of businesses like to whinge about governments and their regulations. At least governments recognise that there's a problem that needs working on," he said.
"The actual amount of money tied up in the red tape inside businesses - HR, finance, IT, executive and governance compliance, legal, marketing - that's where the biggest dollars are."
Deloitte has surveyed Australian businesses about the cost of compliance. It estimates that companies spend about $95 billion a year to keep in line with government regulation.
However, the cost of following their own rules is much higher - almost $160 billion.
"Our survey found that the average worker spends essentially a day a week jumping through the hoops of this self-imposed red tape," he observed.
Some regulation 'a good thing'
Chris Richardson noted few reasons for the unwillingness of businesses to change their ways.
"Partly it's because businesses never look back. You know, they don't do the audit," he said.
"They don't do that project why and say, 'why are we doing this, you know, not just this new rule, but all our rules, do they actually make sense anymore?' People in business, in government, don't like taking risks."
Chris Richardson acknowledged that not all this red tape is necessarily unimportant and unproductive.
"Much of it is a good thing. To take a simple example, over the past decade, miners and the construction sector have become safer. Industrial accidents have gone down," he said.
"To be clear, we're not saying no rules. What we are saying is that our existing rules are costing us a fortune; they're not necessarily making us that much better off, or that much less risky."
Chris Richardson observed that enforcing rules had become a major source of employment in Australia.
"Compliance is a massive business. Compliance workers are now one in every 11 workers in Australia's workplace," he said.
