Why directors are calling for ambitious reform

In recent months, the political winds have shifted with governments around the globe looking at how to reinvigorate their economies and stimulate flagging productivity.

With the ALP re-elected following a resounding victory, the Albanese government has put addressing our stagnant productivity performance front and centre of their second-term economic agenda. The first major step was convening a roundtable focused on economic reform in late August, and a Treasury consultation calling for submissions to that process.

To inform the AICD’s engagement and advocacy, we convened two senior chair and director roundtables in Sydney and Melbourne in July. Twenty senior board members attended the sessions, providing invaluable input. Attendees came from a variety of sectors including financial services, construction, energy, manufacturing, healthcare and higher education.

The member roundtables also featured an economic presentation from McKinsey & Co, highlighting a drought in private sector investment, a key reason for Australia’s poor productivity performance over the past decade. Key themes emerging from the roundtables, and broader engagement with policy committees and Division Councils, are set out below. The productivity challenge is a key feature of the AICD’s FY26 regulatory reform priorities.

Need for a national system-wide approach

Directors would like the government to take a system-wide approach and avoid piecemeal reforms that fail to tackle core problems.

Australia’s traditional growth drivers are weakening amid intensifying climate impacts, rapid technological change and a tax system that is no longer fit for purpose. Coupled with geopolitical uncertainty, a redesign of the nation’s economic architecture to restore productivity and ensure long-term prosperity is needed.

There was strong support for the government creating a uniquely Australian business model that seeks to strengthen existing industries while supporting emergent sectors where Australia may have, or develop, an advantage. Absent this, there is a risk Australia could be left behind as large players established dominance in critical sectors.

Boosting innovation and investment

The hollowing out of Australian manufacturing over recent decades was cited as an issue that needs to be addressed — getting Australia up the value chain was critical. There was widespread recognition that a cohesive R&D strategy is central and that Australia needs to develop sovereign capability in key areas such as AI and digital infrastructure to help reduce reliance on global supply chains.

Discussion also centred on how to encourage large Australian businesses to take on more commercial risk through major capital investments, with McKinsey research highlighting that much of a nation’s productivity gains come from the largest companies.

Better regulation

A consistent AICD message to policymakers is the need for better, more targeted regulation. In our recent submission to the Productivity Commission, we called for Australia to follow the UK’s lead in adopting a whole-of-government commitment to a growth-focused regulatory system and reduce the administrative costs of regulation on businesses by 25 per cent. This theme was reiterated in the roundtable discussion, with directors supportive of a regulatory stocktake and a reset on how policy is developed, to better quantify the compliance costs and ensure post-implementation reviews assess whether reforms are operating as intended.

In that light, the Productivity Commission’s recent interim report, Creating a More Dynamic and Resilient Economy — in which it proposed widescale changes to how regulation is developed — was heartening. Several AICD recommendations are reflected in the report, including our call for a whole-of-government regulatory reform agenda, stronger oversight of regulatory impact and the use of statements of expectations to drive cultural change among regulators.

Planning and project approvals

A common concern is the layered complexity of approvals processes for major projects, including in the housing and energy sectors. Prolonged approval timelines and regulatory hurdles, particularly at a state and local government level, is a serious handbrake on businesses investing in new commercial and industrial developments.

Members were united in their call for a faster, more coherent process, with an overhaul of the Environment Protection and Biodiversity Conservation Act 1999 strongly supported. Roundtable participants were clear that Australia’s national emissions and housing targets would be difficult, if not impossible, to reach without a step change in approach.

Human capital and workforce skills

Member roundtables highlighted the need to develop key skills to sustain key parts of the Australian economy — digital skills to harness the AI revolution, sustainability expertise to capitalise on the net zero transition, and care economy workers to support an ageing population.

Common complaints included the constrained nature of the skilled migration program, restrictive approaches to mutual recognition of overseas qualifications, and divergent state and territory approaches to occupational licensing.

Members recognised the interconnected nature of many of the issues. For example, skilled migrants need to have ready access to housing, but housing cannot be built at the necessary scale and pace under current approval processes.

Tax settings and budget sustainability

The complex patchwork of federal and state taxes was cited as a key inhibitor to the Australian economy. While there was recognition that tax reform is complex and needs trade-offs, directors want to see an ambitious approach that tackles well known issues — Australia’s high corporate tax rate, over-reliance on income taxation and rising costs of the National Disability Insurance Scheme.

Looking ahead

With expectations raised following the economic reform roundtables and the ALP enjoying a strong parliamentary majority, the coming months will be revealing in terms of how ambitious the government intends to be. With the Productivity Commission due to provide its final report by December, sharing its take on what a serious reform agenda should look like, the stage is set for 2026 to be a critical year for Australia.

The AICD will continue to be a strong advocate for long-term policy settings that encourage growth and provide a foundation for the nation’s success. Bringing director voices into the national conversation will be central to our strategy.

This article first appeared under the headline 'Changing course’ in the September 2025 issue of Company Director magazine.