Regulation creates climate for political deals

The Commonwealth's productivity commission and the Victorian Competition and Efficiency Commission have produced admirable reports highlighting over-regulation.

VCEC estimates Victorian regulations introduced last year will cost more than $2 billion.

There are few benefits offsetting these costs, which it acknowledges exclude costs of a stack of measures.

But in spite of regulations being in the spotlight and facing more frequent reviews, each year more regulatory layers are piled on.

Maybe one year we will see the bonfire of ordinances, orders, rules and bylaws heralded by the Bracks Government's target of reducing regulations by 25 per cent.

There is a fat chance of this happening, but at least setting a target shows the government is on a guilt trip about its impositions.  And increased scrutiny of new proposals might slow the regulatory steamroller.

However, governments thrive on crises which are often fomented by noisy advocates and provide the fodder for new regulatory measures.

This year we have a new swag of restrictions stemming from the government-inflicted urban water shortages.  Last year, wailing about global warming provided a rationalisation for new housing regulations.

Though these were damaging to new home buyers, they brought little political fallout because they left existing home owners untouched.

Most businesses see regulations as bureaucratic hoops to be jumped through to make a living.

But the travails in WA illustrate a darker side of regulations and the loopholes that accompany them.

Brian Burke was brokering MPs' pre-selections and electoral support in return for favours for clients.  His currency was ministerial discretion over the vagaries of regulation.

Having, as in Victoria, a Premier and Treasurer of high personal integrity provides no immunity.

In WA, influence buying was not at the top.  Premier Alan Carpenter himself is beyond reproach but this was not the case with junior ministers with powers to decide planning, mining and environmental issues.

There are also backbench MPs with early access to ministerial decisions who have been guilty in at least one case of exchanging this for electoral funding.

Victoria has also had its fair share of issues.  A case that came to light concerns Cr Mohamed Abbouche from the City of Hume.  Steve Bracks forced him to quit the ALP because, through an "honest oversight", he failed to report a campaign donation from a developer whose planning application he supported.

In WA, the companies on Brian Burke's books were heavily into areas where regulation creates the opportunity for fortunes to be made by using political rather than business skills.

Many of these companies were looking to recruit political muscle to circumvent regulations or out-manoeuvre rivals.

Not only is the buying of such favours unfair but it undermines commercial values and, with them, efficient businesses.

Regulation -- and the discretion it gives to politicians in administering it -- offers considerable potential for replacing market with political decision making.

If we allow political savvy to trump market skills, we raise the costs of doing business and move towards the bribe-based economy we so rightly deplore.

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