Coronavirus: Entrepreneurs face ‘a Byzantine maze’, says Productivity Commission

Productivity Commission chairman Michael Brennan. Picture: James Croucher
Productivity Commission chairman Michael Brennan. Picture: James Croucher

Productivity Commission chairman Michael Brennan says governments at all levels need to make it easier for Australians who want to “take a punt” and start new businesses.

Mr Brennan argued that the national focus on major government spending programs should not come at the expense of essential reform to help power the post-COVID-19 recovery.

He said somebody who wished to start a new cafe in NSW, for example, faced “70 points of contact across state and local governments to get a business in place”.

“They want to start a cafe and know nothing about the Byzantine maze of government regulations,” he said,

Mr Brennan said “the human impact” of presenting a potential business owner with that level of complexity was to make them think twice. He said the key question for policymakers was: “When there are people who want to take a punt and start a new business, are we supporting them or are we making their life more difficult?”

He said the nation faced “a particular challenge around new business formation and risk appetite”, warning that the scale of the COVID-19 economic shock could “scar” entrepreneurs’ willingness to take risks.

Business owners might believe “that extreme scenarios are just that little bit more likely, more ­believable, than they would have thought in 2019,” he said. “And that could feed into their investment decisions.”

Scott Morrison has said his government will use “the full suite of measures” to help fill the immense hole in activity left by the worst recession since the 1930s, and that the focus of the October 6 budget will be on boosting ­“aggregate demand”.

In a speech to the Australian Business Economists on Wednesday, Mr Brennan said the massive injection of taxpayers’ money to cushion the impact of the health crisis was “fundamental” to dealing with a downturn of this magnitude, but that it was a “necessary, not sufficient, condition for recovery”.

“We need to take the supply side seriously,” he said.

Mr Brennan said the consensus view that governments during recessions should spend first and worry about inefficiencies later risked missing the opportunity to lay the groundwork for a more ­vibrant recovery.

“Nowhere is this starker than in infrastructure policy,” he said. “If you build things solely for demand-side stimulus, you run the risk of wasteful spending. If you do careful project assessment, you can boost productive capacity and aggregate demand.”

The comments came as the Centre for Independent Studies called for comprehensive deregulation to support investment and employment growth, calling for an end to the “anachronistic, inconsistent and excessive regulatory landscape”.

Citing prior research that regulation cost the economy $176bn a year in reduced income, a new research paper recommends deregulating supermarket trading hours, lifting the ban on single use plastic bags and reducing “overly procedural” health, food and safety regulations for restaurants and cafes — as well as improvements in planning and zoning requirements.