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Recent research commissioned by the AICD shows that reducing regulation is key to driving greater growth and productivity through enabling businesses to adapt, invest and innovate.
Australia has entered a period of economic stagnation marked by very low productivity, declining real wages, tepid economic growth and low rates of investment. Our annual productivity growth has fallen from 2.2% in the 1990s to just 0.1% in the 2020s – its lowest rate in more than 60 years.
New AICD research commissioned prepared by Mandala Partners, The Stagnant Nation: Lifting Australia's Dynamism, demonstrates that an increasing regulation and regulatory intensity is central to this story.
What is economic dynamism?
Economic dynamism captures how an economy adapts, innovates and grows. A truly dynamic economy is marked by people taking the risk to start businesses, move to new jobs better suited to their skills, business and boards having the confidence to make significant investments, organisations investing in research and development and competitive markets promoting lower prices and better products and services. Unfortunately, Australia has experienced a profound decline in dynamism across all key elements of economic dynamism.
The impact of this is significant. The decline in dynamism is contributing to weaker productivity, economic growth and declining Australians’ living standards. Australians are experiencing this through lower real wages – real wages have fallen by 1.3 percentage points from the 2010s to the 2020s.
Why is economic dynamism weakening in Australia?
The research finds strong evidence that increased federal regulation is associated with material decreases in dynamism, and that tackling the role of regulation will be central to recreating the conditions that support a more dynamic and productive Australian economy. that the research estimates that federal regulation has contributed 20% to the decline in dynamism in the Australian economy in the past 20 years.
These findings align with those of the Productivity Commission and contribute to the broader national discussion on how Australia can reverse its economic malaise.
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What rising regulatory burden means for boards
The effects of rising regulatory burden and declining dynamism is experienced inside businesses and boardrooms. Businesses and boards report spending more time navigating approval processes, reporting obligations and compliance requirements, leaving less capacity for growth, investment and innovation. This is backed by the research, which finds that board time and attention on compliance has more than doubled in the last decade. It is also echoed in the AICD Director Sentiment Index result that finds that compliance and regulation remains the leading factor impacting boards’ risk appetite.
Case studies highlighted in the research include:
An energy company that required 22 approvals to vary a pipeline license.
A fintech start-up that spent eight to nine months and around 50 iterations of disclosure documents before serving a customer.
Health and education organisations reporting that compliance demands were taking staff away from frontline service delivery. This is demonstrated by the fact that non-teaching staff numbers are growing 2.5 times as fast as teaching staff in NSW independent schools.
For boards, the concern is that organisational time, money and expertise absorbed by compliance and administration are not available for strategy, investment, innovation and long-term value creation.
A case for optimism – The gains from reducing regulatory burden
The research does have a case for optimism - 20% of the economic activity lost through declining dynamism could be recovered by reducing the federal regulatory burden. Reducing regulatory burden towards late-2000s levels could increase GDP by at least $20 billion a year over the next decade.
More broadly, stronger productivity supports sustainable improvements in wages and living standards. The report estimates that returning Australians’ real incomes to their 2020 levels could mean around $60 billion more for Australian households.
The question becomes how Australia can rebuild the foundations for growth, and what this means for boards, businesses and long-term prosperity.
What is the AICD recommending?
The research and accompanying Snapshot publication outline the AICD’s practical reform agenda to improve economic dynamism and productivity.
Our flagship recommendation is that federal government establish a joint public and private sector taskforce, to:
- identify the regulations that most obstruct economic dynamism;
- recommend targeted reforms, with clear implementation timelines and responsible agencies;
- assess how different regulatory requirements interact and compound; and
- report publicly on progress against a regulatory burden-reduction target.
The AICD’s reform package also includes specific recommendations that will move the needle now:
- implementing key better regulation recommendations from Productivity Commission’s Creating a more dynamic and resilient economy pillar inquiry;
- removing Group 3 entities from the climate reporting regime (estimated savings of $2 billion across four years);
- expanding National Competition Policy and the National Productivity Fund to incentivise meaningful state-based reform (estimated increase to GDP of $33 billion);
- attaching real consequences to missed regulatory approval timeframes under the Environment Protection and Biodiversity Conservation regime (estimate of $4.3 billion in economic benefits); and
- extending the Automatic Mutual Recognition regime to additional occupations (estimated savings of up to $142 million each year).
The momentum for genuine regulatory reform
Reversing the declining trend in productivity through a reduction in the regulatory burden is a central policy focus for the AICD.
To support this, the AICD has been broadly and deeply engaging with both government and the bureaucracy around the research findings and our recommendations. The AICD has been presenting the research and our recommendations to key decision makers, including senior Ministers, members of Parliament and representatives of the Department of the Prime Minister and Cabinet, Treasury and the Department of Finance.
On 14 October 2026 the Deputy Leader of the Opposition, Jane Hume, introduced the Treasury Laws Amendment (Scrapping Scope 3) Bill 2026 (the Bill) to the Senate. The Bill looks to remove Group 3 entities from mandatory sustainability reporting. In speaking on the Bill, the Deputy Leader of the Opposition Jane Hume said Australia “cannot regulate its way to prosperity.” This reflects a greater focus amongst the political parties around need for regulation reduction.
The AICD expects relevant announcements from the Albanese government in coming days and looks forward to reporting back to members as developments occur.
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