Cutting red tape shows that when we ‘trust the market’ taxpayers usually end up footing the bill

Australia doesn’t have enough regulation in key sectors of our economy and the result is an enormous waste of money and resources spent fixing up damage done by shonky business.

In just the last week the ACT Government has hired specialist asbestos contractors in response to asbestos found in sand in schools, which is costly – and there is no indication that the private companies responsible will be paying for it. On top of that,30,000 students have had their expensive educational qualifications revoked because private education providers weren’t actually providing education. That’s 30,000 people who should be working in childcare and aged care wasting time redoing what should have been done right in the first place.

Regulation isn’t just a good way to protect people and the environment from pollution and consumer rip offs, regulation is a great way to boost productivity growth as well. But in Australia this simple truth is oddly absent from most debates about reforms to drive productivity growth. Instead of a sincere debate about what things (like AI) might need more regulating and what might need less (like recreational drugs) Australians are served up tired cliches about the need to ‘cut red tape’.

Such self-serving nonsense typically ignores the history showing when we ‘trust the market’ taxpayers usually end up footing the bill. Anyone recall the royal commissions for everything from banks stealing from dead customers  to elderly Australians dying from malnutrition in privately run aged care homes?

Take the latest example of asbestos-contaminated sand turning up in schools. We’re told the problem was discovered by accident. Of course it was. Why would regulators have been out checking for pollution the way police check for speeding?

While the sand was cheap, the costs of cleaning it up, in terms of money, labour, disrupted schooling, anxiety and possibly even long run illness, will be high. And of course, it won’t be the companies who will pick up the tab, that will fall to ordinary taxpayers like you and me.

This sorry and scary debacle is not some form of glitch. This is the system we have built in Australia. Hidden pollution, dodgy education courses and buildings made of flammable cladding are the direct result of decades of deregulating companies and defunding our regulators.

Asbestos in school sand products is new, but just last year, asbestos was discovered in recycled mulch used across parks, gardens and public spaces. Whoops. How did that happen?

When the Opal Tower and Mascot Towers in Sydney cracked and residents were evacuated many of the costs fell on residents, insurers, governments and even those waiting for apartments across Sydney to be finished. The builders required to stabilise and repair a poorly constructed building don’t come from thin air, they are drawn away from, or delayed attending, other construction

Then there’s the nationwide project to replace flammable cladding on high-rise buildings. This enormous waste of construction workers is linked directly to the lack of ‘red tape’ to monitor the quality of the building materials coming through our ports.

Low-quality steel imports that fail stress tests, corrode prematurely or require costly reinforcement on arrival are similarly driving down productivity. Importers save a few dollars buying cheap material and Australian builders then spend weeks doubling beams, strengthening joints and redesigning structures because the original product simply wasn’t fit for purpose.

But the most bizarre example of confusing the short-term benefits of cutting corners with the long-run cost to productivity came from this year’s Productivity Roundtable. The architects of our historic deregulation agenda united with the CEOs of today to declare, yet again, that if we wanted more productivity, we would need to have less regulation. But one of the only examples they could agree on was the abolition of new building standards designed to help Australian with the extreme heat and storms that climate science says are heading their way.

Every homeowner knows it’s cheaper to install insulation when a new house is getting built than to retrofit it later. But sadly, it seems every economist at the so-called Productivity Commission knows that it’s better to give everybody ‘choice’ rather than require every building to be good. Of course, the Productivity Commission have also spent years arguing against energy efficiency standards for appliances.

Good regulation stops unsafe materials at the border. It makes property developers build things that don’t crack. It prevents asbestos from entering mulch or sand and it stops wage theft, dodgy training course and all sorts of other wasteful activity. Good regulation drives safety and efficiency.

The economic cost of bad regulation is measured not just in the tens of billions of dollars spent on repairs, remediation, legal disputes, insurance payouts and higher energy bills, but in hundreds of thousands of workers wasting time fixing problems that should never have been allowed in the first place.

It’s time that our corporate regulators stopped pretending the invisible hand of the ‘free market’ isn’t trying to pick our pockets and started doing a better job of protecting us from corporate greed. It wouldn’t just help the environment and consumers, but it would do far more to boost productivity growth than another roundtable about deregulation.

Richard Denniss is the co-chief executive of the Australia Institute.