Australia needs simpler, more flexible rules and regulations to become more agile in a digitally disruptive world.
Digital platforms such as Uber and Airbnb are assuming a greater foothold in the Australian services sector, despite regulatory and other impediments, and our internationally high smartphone and tablet uptake rates suggests considerable room for more digital growth.
It is reasonably straightforward to figure out why the digital economy has taken off, with one of its most important benefits being its capacity to reduce transaction costs, or the costs of engaging in market exchange.
Thanks to a digital platform the owners of idle and underutilised assets, such as empty seats in a car or spare rooms in a house, can more easily find people prepared to pay money to use the available capacities.
And this reduction in transaction costs aids the expansion of market opportunities between willing sellers and willing buyers, as indicated by a Deloitte Access Economics study that 61 per cent of UberX rides nationally would not have taken place in the absence of the digitally enabled service.
One of the more amazing implications of recent digital innovation is that it empowers owners of varied consumption goods to reconceptualise them as capital goods which may generate returns, a particularly significant development for low and middle-income families seeking new income streams.
The availability of diverse products for consumers stands as a substantial benefit from the emergent digital economy but, as incumbent taxi drivers and hoteliers have made clear, the onset of digital platforms for accessing alternative goods and services can conceivably be disruptive for some.
Complaints by suppliers affected by digital disruption, whose economic existence have long been insulated by high barriers to entry, harkens back to Joseph Schumpeter's "gales of creative destruction" threatening to outdate conventional ways of making and selling things.
The temptation is for those whose enterprises are being digitally disrupted to seek policy refuge by government, often in the form of punitive regulations against the new digital upstarts, but recent experience around the world is showing such an approach futile.
A recent report by the Productivity Commission sheds important light upon the challenges faced by public sector regulatory agencies, contending with perceived (by, ultimately, non-existent) trade-offs between digital agility and the interests of those already in the marketplace.
Most sensibly, the commission has come out in favour of not condemning the likes of Uber and Airbnb to a premature end at the hands of regulators.
As the commission says in its digital disruption report, "getting the most from technological change requires an adaptive regulatory approach".
One of the key recommendations is that governments should avoid the temptation to merely extend existing regulatory approaches to the digital world, "particularly where new entrants present negligible risk to consumers or others".
Rather, the commission suggests that digital disruption presents a fresh opportunity for government "to reassess risk and adjust regulation accordingly".
In this context governments should provide "fixed-term exemptions from regulatory requirements that inhibit the entry of new businesses", or at least apply a "regulatory sandbox" whereby some regulations are lifted for a sample of customers and subject to risk-based criteria.
The commission recognises there is some potential for existing mandatory standards to lock in existing technologies and hamper innovation, so lighter-touch standards are needed that are "outcome focused and not overly complex or prescriptive".
What is also interesting about the commission's report on digital disruption it that it duly recognises the interconnected ways in which our complex and overbearing regulatory state can affect the incentives for people to get involved in the digital economy.
Can the existing workplace relations system, with its tendency to dictate quite prescriptive terms and conditions of employment across the Australian economy, accommodate the desires and interests of people who want flexible working roles enabled by digital platforms?
Trade unions and other selected interest groups have long railed against the emergence of part-time and casual work, and are equally hostile to independent contractors, but the question posed here will take on greater importance as the digital economy assumes greater popularity.
The interplay of economic and political interests have yielded vast differences in fortunes for the digital economy around the world, with the ACT legalising ridesharing services last year serving as an interesting case study.
As a condition of Uber's entry into Canberra's transport market the ACT government invoked criminal history and driver history checks, even though Uber already imposes self-regulation in these respects, and is aiming at accreditation requirements for ridesharing services.
Uber and other ridesharing service operators must also install cameras in their vehicles, to the extent that consumers are allowed to pay for the service in cash.
The ACT reforms substantially reduce taxi licence fees and remove red tape restrictions around uniforms and cleanliness, while taxi drivers retain an ability to pick passengers off the street and at taxi ranks.
What has taken place in Canberra is a far cry from the outright bans and punitive fines seen in Europe and elsewhere, but the horses-for-courses changes don't necessarily come across as the unambiguous deregulation needed to put all market participants on an equal footing.
Because it is well known that much innovation occurs at the boundaries of industries, occupations and technologies, we should ideally seek regulations that are not only technology-neutral but also industry-neutral and occupation-neutral.
Otherwise, what looks like sensible precautionary regulation for a new industry today may, as industries evolve, become the unwarranted red tape of tomorrow.
And we should guard against slippage in commitments to competitive neutrality principles in regulation-making, especially in the event that certain operators attempt to convince future governments their competitive vulnerabilities are of political importance.
As was the case with the steam engine of yesteryear, people will use technologies introduced today to creatively discover new ways to truck, barter and exchange.
Like the entrepreneurs that challenge them, Australian regulations must be simple and even-handed, yet flexible, so that there's enough room for disruption to fit in.
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