On 25 January, the AICD provided a FY2024-2025 Pre-Budget submission to Treasury.
Australian Companies are operating in an increasingly complex regulatory environment with a multitude of new compliance obligations, technology and sustainability issues on board agendas. Organisations are feeling pressure, particularly where legislative and regulatory reform measures begin to overlap or where there is a high degree of uncertainty or a lack of skills to comply with new regulatory obligations.
The AICD's submission calls for the cumulative effect of regulation to be looked at holistically and harmonised across Government. We outline key areas where we consider Government should prioritise corporate governance related reforms, while providing broader commentary from the AICD Chief Economist on the macro-economic outlook drawing on the AICD’s Director Sentiment Index.
Our key points were:
- Critical reforms are underway in the adjacent policy areas of Australia’s cyber security and privacy law settings, while Government also considers a future regulatory framework for artificial intelligence (AI). A coordinated approach across portfolios and relevant agencies must be taken to ensure that regulatory changes are consistent, appropriately sequenced and do not unnecessarily overlap. A high priority should also be placed on reducing, not adding to, the regulatory burden for smaller and NFP entities in the design of new obligations in these areas.
- The introduction of Australia’s mandatory climate reporting regime provides an opportunity to facilitate high quality, comparable disclosures in support of Australia’s climate change goals. However, it is critical that the legislative design does not undermine the policy intent for the regime. While supportive of the Government’s recent exposure draft legislation to introduce climate reporting in Australia, the AICD has concerns with certain aspects, including the exclusion of transition pathway disclosures from the transitional liability relief mechanism and the application of the regime to smaller and NFP entities.
- The introduction of climate reporting and the heightened liability risks it presents in the disclosure landscape should also be considered as part of the ongoing statutory review of changes made to Australia’s continuous disclosure regime. The re-introduction of a ‘no-fault’ continuous disclosure obligation could significantly hamper the comprehensive adoption of mandatory climate reporting, by encouraging a bare bones approach to limit legal risks.
- Australia’s NFP sector continues to face considerable challenges in an increasingly resource constrained environment. NFP directors are being required to commit more time and rigorous focus to the operations of their NFPs, amidst the impact of tougher governance standards resulting from recent Royal Commissions and workforce shortages. We encourage Government to prioritise a comprehensive review of regulatory frameworks that apply to NFPs, a harmonisation of fundraising laws across the country, and the delivery of capacity-building initiatives for NFPs responding to extensive Royal Commission recommendations in the care sector.
- Given the increasing complexity of regulation and legislative frameworks in Australia, the AICD recommends consideration of regulatory review mechanisms that would complement the work of Government. This includes an expert and independent body to support Treasury’s policy-making related to corporate law and corporate governance, as well as an Australian regulatory grid focused on ensuring that regulatory changes in the financial services sector are approached cohesively.
- AICD’s DSI results indicate that the cost of living, labour shortages, inflation and interest rates are the top economic challenges facing Australian businesses.
- AICD members, through the DSI, have highlighted addressing housing affordability/supply, productivity growth, and energy policy as the top three areas for short term policy intervention. Climate change, Australia’s ageing population, productivity growth and energy policy are the highest ranking longer term priority areas requiring Government’s attention.
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