The origins of the existing system of RPI in the Australian national government can be found in two sources: firstly, in the more general concern to ensure successful regulatory reform by improving and making more rigorous the processes for formulating new or modified regulation; and secondly, in the greater emphasis placed by Prime Minister Howard on the need to reduce the regulatory burden on small business, a theme he stressed in the 1996 election campaign (Howard 1997: iii). On gaining office a National Small Business Summit was called, meeting in June, 2006. The summit endorsed a ‘Charter of Principles’, in relation to the government regulation of business, endorsed by all levels of government, with the tenth principle asserting that Australian governments should develop a system of performance indicators to measure the efficiency of their regulatory regimes (SBDTF 1996: 150).

A major outcome of the recommendations of the National Summit was the establishment in 1996 of the Small Business Development Task Force (SBDTF) to review the ‘compliance and paper burden imposed on small business’. The Task Force reported in November 1996 (SBDTF 1996: vii). The report referred to RPI in three contexts: one, in relation to the need to establish a set of performance indicators that would enable both the government and small business to track Government’s performance in implementing the report’s recommendations; two, in relation to the need for the development of a set of benchmarked, nationally comparable performance indicators for regulation that would enable more effective management of the growing regulatory burden by providing accurate information; and three, related to the second, the need for more detailed, varying sets of indicators at the departmental and agency level (SBDTF 1996: 131-34, 148). The report recommended 10 performance indicators relating to: transparency; accessibility; appropriateness; predictability; flexibility; lower cost to business; administrative efficiency; fewer and simpler forms; better instructions; reduction in perceived burden; and cultural change (SBDTF 1996: 131).

The Government’s response to the report was generally positive. In particular, it agreed to one recommendation (number 62) that a national set of performance indicators and benchmarking strategy should be developed (Howard 1997: vii, 81-82). It noted that a meeting of small business ministers and the Australian Local Government Association already had agreed that the adoption of appropriate performance indicators was crucial and that a working group of officials would develop policy options for implementing comparable performance indicators for consideration at the next Small Business Summit (Howard 1997: 82). In addition, it noted that the Commonwealth Government had stressed the need for all departments and agencies to continue to develop ‘meaningful and measurable’ performance indicators capable of demonstrating the following properties:

While expressed rather differently, the latter six indicators covered all of the areas recommended in the SBDF Report with two exceptions: the indicator intended to measure the achievement of a ‘lower cost to business’; and, the indicator for administrative efficiency. The Government noted only that there was a need for an indicator capable of demonstrating that new or revised regulation would confer ‘a net benefit on the community’ without any mention of reducing costs to business, although this could reasonably be inferred, given the context of the Prime Minister’s message (Howard 1997: 82). It made no mention of an indicator related to administrative efficiency and provided no explanation as to why indicators for these two areas had been omitted.

While the members of the SBDF and their supporters inside and outside government might well have been satisfied with their success in gaining acceptance for the bulk of their recommendations there were, with the exception of the ‘lower cost’ and administrative efficiency indicators, limitations and significant challenges in what they had proposed and what the government endorsed. Four stand out as of particular importance. The first, as noted above, was the failure to specify an indicator in relation to business costs, although any calculation of the net benefit to the community of regulation (see the fifth dot point above), if sufficiently rigorous, would necessitate the calculation of business costs as part of the calculation.

The second limitation was the neglect of any recommendations for indicators that would enable departments, agencies and, ultimately, cabinet, to measure the performance of existing business regulation in actually achieving its specified objectives. This was in marked contrast to its very clear view that the existing systems and processes for indicating the quality of new and modified regulation needed improvement. The neglect may have been deliberate — an implicit acknowledgement of the difficulties of such a task — but it was a limitation that left the government (and, importantly, the working party of officials charged with developing policy options as well as federal departments and agencies) free from the explicit requirement to consider and recommend how such a system might be developed and implemented. This was unfortunate for, in a parallel development, departments at this time were increasingly being required to introduce systems of output and outcome plans and budgets with associated performance indicators, within which any desired RPI could have been embedded (Department of Finance and Administration 1999; and 2007; Department of the Prime Minister and Cabinet 2007).

The third limitation was the failure of the government, as noted above, to specify indicators of administrative efficiency in relation to the implementation of regulations. This may have been because it was realised that several systems were already in place — or being put in place — and that these were regarded as sufficiently informative. Examples included the annual parliamentary reviews of departmental expenditures, the performance audits of the Australian National Audit Office and departmental annual reports. The latter contained the departments’ report of their performance against their outputs and outcomes, using performance indicators specified in the PBS — but not the desired RPI — although there was nothing to prevent such indicators being developed and used by departments. It is interesting that they have not included RPI because, in conjunction with the PBS performance reports, they would have provided a fuller picture of regulatory performance.

The fourth limitation was the SBDF’s failure to recommend that responsibility for RPI at the ‘broad policy level’ be established under the control of the existing Office of Regulation Review (the ORR). As the ORR was a unit in the influential Productivity Commission — and located, therefore, within the broader Department of the Treasury portfolio — this might have provided it with an important source of power in relation to the design, implementation and use of RPI.

In summary, while the move to develop a set of RPI that would enable the comparison of regulatory performance across departments and agencies was a marked step forward in the effort to improve regulatory quality, the relative lack of focus on: the development of indicators for specific businesses compliance costs; the achievement of regulatory objectives; administrative efficiency in implementing regulations; and an appropriate organisational location, suggested that any resulting RPI system would be less than optimal.