On 12 August, Lachlan Clark joined Dean Mackin on TNT TV to discuss IPA research into red tape.
All media appearances posted onto the IPA website are directly related to the promotion and dissemination of IPA research
Below is a transcript of the interview.
Dean Mackin:
And if you’d like to be an even more interactive part of it, pretty easy, get on the online chat or you can send an email. How do you do that? Easy, [email protected]. And of course, the online chat. Very interactive. And I’ll even read out the odd comment.
I’ve got Eileen suggesting she has two hats. I assume she’s talking about that particular hat, which I used to great effect walking down the streets of Newtown on Sunday, my old stomping ground. I grew up in Newtown. I would’ve got pats on the back if the people who live there 30 years ago were still the case, not so much these days.
I like to trigger people. It was a little bit fun. But anyway, I did it all in jest. And who else said good day? We had Nev Kay saying good day as well. Now we’re going to be talking to Lachlan Clark, one of the terrific people and we get several of them from the Institute of Public Affairs.
By the way, you can join the Institute of Public Affairs as we alluded to ipa.org.au if my memory serves me correctly. Lachlan will correct me if I’m wrong. He’s a research fellow there and a terrific fellow. We’re going to talk about Western Australia and why it leads on others as a place to do business in Australia. Welcome to the programme Lachlan Clark.
Lachlan Clark:
Thanks for having me, Dean.
Dean Mackin:
Lots going on. I would never have guessed it. If you would’ve said to me, what is the best place to do business in Australia post the last five years? I would’ve thought because the cost of living, I believe is a little bit cheaper up there, house prices and probably the follow-on to rents and whatever, might’ve been Queensland. Certainly I would’ve picked Melbourne or Victoria, I should say, as the worst place. But the other thing as well, New South Wales, I probably thought would’ve been a terrific place to do business because of its immense population. Give us the stats. Tell us what we need to know.
Lachlan Clark:
Sure. Thank you. So this particular report has assessed state economies in terms of their environments for business conditions. So how friendly states are for business. The report has shown that Western Australia is the best in the country in terms of its business friendliness. And conversely, it’s also showing that Victoria is the worst place to run a business.
So the report has assessed states on 12 metrics to put it into four categories. We looked at state taxes, we looked at red tape, we looked at labour and construction costs and also fuel and energy costs. To put it broadly, Western Australia, part of the reason why it is the most friendly place to run a business is because its state government recognises the value which businesses in that state bring to the economy. And as opposed to places like Victoria, Victoria’s had-
Dean Mackin:
I think we may have just dropped his feed. I think… Oh, your back mate. Sorry. Your internet dropped-
Lachlan Clark:
Sorry.
Dean Mackin:
[inaudible 00:03:09]
Lachlan Clark:
Yeah. So Victoria’s had years of economic mismanagement, and as a result, it has skyrocketing debt. It has the highest debt in the nation out of all the states. And as a result, the government’s increasing taxes and it’s essentially, for businesses in Victoria, it’s just harder to get ahead.
Dean Mackin:
It would be. And I like what you said, I mean, the immense debt. I mean they are literally into some ridiculous amount of debt following the COVID era. Thanks to one Daniel Andrews. Many might’ve considered the WA, apart from the reasons that you gave us, it would’ve been the mining industry being so big over there might’ve helped the economy and being having more money in the economy, perhaps businesses do a little bit better. But I love what you said about it coming down to a government that wants businesses to succeed and is prepared to do things to help them. And I think that is imperative.
Lachlan Clark:
Oh, that’s exactly right. State governments have many policy options at their disposal, which can either make it easier or harder to run a business. State governments, they impose taxes and levies predominantly on business. The main three being payroll tax, land tax and stamp duty. And they also set and administer policy such as energy policy, but also they also implement regulations.
So they have many decisions that they can make and policies which they can implement, which sometimes can make it easier or harder. In the case of Western Australia, they recognise and value their businesses and their industry and as a result, it’s an easier place to run a business.
Dean Mackin:
You made some good points. One of them is all the red tape and all the other things that go along with being an employer. And the problem with that is that… I mean I, as a large business owner, many, many years ago, a couple of decades ago, having a large internet or reasonable-sized internet company would always try and get people on as contractors rather than employees.
It was just a hell of a lot less to worry about. And I’m wondering if governments, I mean, yes, we need protections for those who are employees, but if people are losing out on jobs, ultimately does government need to make it a bit easier for employers to have people and may be some protections for employers from time to time?
Lachlan Clark:
Yeah. Sure. So there’s a lot of different layers to how businesses are regulated and how… Because there’s obviously, you have the federal regulation, and then you also have the state. So what we’re looking at here is simply the differences across the states, which state governments have an involvement in the result. But if you look at things on the federal level, Australia’s becoming an increasingly harder place to run a business.
So at the same time, we’ve also done some other research showing that the number of red tape bureaucrats by 2025 reach 106,000 people. So it’s effectively showing that there is an increasing number of bureaucrats in the federal government which are responsible for administering and implementing regulation.
And there’s no coincidence that at the same time, we’ve also provided some other research showing that red tape is also at an all time high nationally. So it’s not just the state regulatory networks and the state taxes and these impediments that businesses are facing. There’s also the national side as well. So there’s duplication across the board, which businesses, it’s just-
Dean Mackin:
I think we’re having some problems with these video. Just what we need, some more red tapes and more bureaucrats. What could possibly go wrong? I’ve got a question for you. When it comes to this report, did they break it down into the different types of businesses like for hospitality, mining, did they break it down into categories? Are there some doing better than the others or is just overall business from state to state?
Lachlan Clark:
Yeah. Good question. So this report rather has just assessed the conditions, so not how well particular industry is performing. And it isn’t so much an economic performance report. We have provided some other research just recently breaking down the states on its economic performance.
And there’s no surprise actually that in that report which showed that Western Australia and South Australia were the top performing state economies in the nation. They’re also the most friendly places to run a business. And I guess the importance is, is that business conditions, if a business is able to operate with ease and without obstruction, it can then employ more people, it can then expand its operations, and as a result that actually improves economic development in that particular state.
So there’s little surprise then that the states with the most business friendly conditions are also the states that have the best economies in the nation. And at the same time, Victoria. Victoria in our economic report showed that it was the worst performing state economy in the nation and there’s no coincidence that it also has the worst business friendly jurisdiction.
So these things, they go hand in hand and it’s important that leaders at the state level recognise that in order for their state economies to improve and flourish, that they need to have the right policies in place to ensure that businesses can expand, employ more people, and in turn grow the economy.
Dean Mackin:
Victoria not a place I would pick to live, if I’m honest. I know eight or nine people who have with their entire family moved from the state of Victoria and almost all except for one have moved to Queensland. The one exception has moved here to New South Wales. In fact, at Newcastle just up the road from where I find myself.
Have there been studies done historically that we can compare which states fared better or worse, let’s say going back four or five, six years?
Lachlan Clark:
It’s a good point. Well, actually just to address the first point you made. We’ve also done some research showing that the number of businesses since COVID, which states have had the most number of business exits and entries. And to your point, Victoria’s had the most number of businesses leave its states since COVID.
So we’re at a point now, it’s a critical juncture, I like to say, whereby businesses can no longer deal with the current environments and they’re just moving into state, like you said, multiple families that have left. These are households, these are businesses that they just can’t keep up with, just the increasing regulations.
To your second point, we haven’t looked at it over a longer period of time as you’ve mentioned, but doing so, it could reveal some interesting points. I guess the most pressing situation is the present because that’s what businesses are currently facing and it’s quite revealing.
Dean Mackin:
It will be very interesting if we continue to have these done. Will lessons be learned by those states who are not doing so well and shall those who are doing well serve as a model for the others? The other question is, and I wonder if politics comes into it.
I’ll give you an example. Elon Musk moving many of his operations from the state of California to Texas, solely I would say, not just so he can do business in an easier fashion, but certainly I think to punish those in California because he doesn’t share their political views for the most part.
Lachlan Clark:
Oh, look, I think that is certainly something that you’ll start seeing or if not have already started seeing domestically here in Australia. If you’re a large corporation and you have to pay a higher payroll tax and a higher land tax and-
Dean Mackin:
We do seem to be having some problem with that feed. But it will kick in a second. Please continue.
Lachlan Clark:
Sorry about that.
Dean Mackin:
It’s okay.
Lachlan Clark:
Just simply put, it’ll come a point in which it just doesn’t make sense. Why would you have your business in Victoria if you have to have a significantly larger costs? It’s just nonsensical.
So another part of the equation also that we’ve looked at is energy prices. Energy prices are a fundamental element to do anything. Anything that we do in modern society requires energy. A large proportion of business’s overall expenses will be its energy costs and state governments have direct responsibility in setting state policies which decide how they invest in energy and so forth.
What it’s shown at the state level is that although South Australia is demonstrating itself to be a really great place to run a business and it’s gaining quite a reputation actually of being open for business and so forth. It does also have the highest energy prices. So we’ve looked at the prices that businesses pay for gas and electricity and South Australia, looking at the two in total has the highest. And as a result, if you’re a business in South Australia, they’d be looking at how much more it’s costing them to run their business and thinking, “Okay. Well, maybe it’s best we relocate potentially.”
So these are the things that businesses look at. And if you can save significant sums of money moving elsewhere, like you said, I think why wouldn’t you?
Dean Mackin:
It really is a problem when Australia used to have the lowest electricity prices or very close to it in the world. I mean, here we find ourselves moving forward. Just fish and chip shops having to close because of their electricity bills, let alone those who might manufacture steel or something that need immense amounts of electricity. And then taking their operations offshore and who could blame them?
I love some of the stats that we’ve got here. Western Australia, the lowest labour, construction, rent and energy costs. South Australia, lowest tax state, sorry, lowest state tax and red tape burden. It’s always a good thing. New South Wales, lowest land tax, but highest rental costs, no surprise there. Queensland, highest construction and fuel costs. I didn’t realise that was the case, but interesting.
And Victoria with the highest state taxes and red tape burden. A legacy of one possibly Dan Andrews paying off all that debt. We need those high taxes.
Lachlan Clark:
That’s exactly right. It’s really important that state governments, in order for their governments to be most efficient, they need to be as efficient and small as possible. The larger a government becomes, it spends more. And when it spends more, it needs to actually raise more revenue i.e. through taxes to cover its expenses.
So in Victoria, in order for there to be a meaningful change in the direction of the situation, there needs to be a concerted effort to reduce debt and that can only really be done by the government tightening its belt and making sure that the debt does not continue to balloon as it is because if it does, then it will have to just increasingly tax and its main source of taxation revenue is Victorian businesses.
Dean Mackin:
And Lachlan, we’ve only got about 10 seconds, mate. Lachlan, who is of course a research fellow at the Institute of Public Affairs. Mate, thank you for coming on the programme and sharing your time with us today.
Lachlan Clark:
Thank you, Dean. Thanks for having me.
Dean Mackin:
Everybody stick around. Jeff Crouere, host of WGSO coming up next.
This transcript with Lachlan Clark talking on TNT TV from 12 August 2024 has been edited for clarity.
