Regulatory systems involve two key elements, the process of regulation-making and the instruments and approaches required for compliance and enforcement (Doern 2003). Recent Australian debate on regulatory reform (Regulation Taskforce 2006) has predominately focussed on the second component with the objective of simplifying instruments of enforcement, for example, proposing a movement from traditional, prescriptive regulation, to various models of industry self regulation. It also stresses the need to streamline regulatory systems by, for example, removing duplication of effort across levels of government and achieving regulatory uniformity. In summary, the key demands from industry and governments have been that we need to reduce the level of regulation and simplify what remains.

There is no doubt pressure needs to be maintained to ensure regulatory systems are responsive and adaptive to change. Regulatory frameworks need to be under constant review in order to ensure unnecessary regulation is removed and where appropriate more innovative and responsive mechanisms introduced. However, policy makers also need to monitor, evaluate and improve how participants in a regulatory sector function within complex systems. In particular, the central agencies of government have an important role to play in assessing whether the institutional arrangements and regulatory mechanisms within particular policy sectors facilitate and develop the capacity of businesses, non government organisations and key public sector agencies to participate in the policy-making process and achieve higher levels of regulatory compliance.

In a globalised world markets are becoming more complex and interdependent. Local standards, rules and operating procedures are increasingly influenced by national and international forces that aim to more seamlessly integrate the efficient movement of goods and services across national boundaries, free from unnecessary and varying, regulatory requirements. The result is a proliferation of international trade agreements and the increasing development of international standards, accompanied, at the national level by processes of mutual recognition, harmonisation and the adoption of Australian Standards aimed at regulatory simplification.

There is also mounting pressure to further integrate and build relationships across related systems. Those responsible for the regulation of the freight rail sector, for example, now take a stronger interest in how its operations interface with road and sea transport systems. As COAG notes: ‘More flexible rules governing access to the road network should be established that will allow freight carried by rail to be seamlessly picked up and dropped off by road transport operations.’ (COAG 2006: Appendix C:14). The result is increasing regulatory harmonisation, as well as an increasing harmonisation of, for example, communication systems across transport modes, such as standardised electronic tracking systems for containers and goods. These systems are then ‘overlayed’, by other regulatory regimes such as those related to OH&S and the environment. In terms of Doern’s analysis of regulatory regimes (2003), we see sectoral regulatory issues specific to rail interacting with broader ‘horizontal’ framework regulatory regimes that are universally applied across a range of policy fields. This interaction of regulation, standards and rules that have both specific and universal impact on policy sectors adds to the complexity of policy, building a layered regulatory framework into the system of governance.

It is this constantly changing and overlapping nature of regulatory systems that suggests that the debate on regulatory reform should be expanded to include strategies that enhance the capacity of agencies and stakeholders to better manage and respond to this increasing regulatory complexity. This is an issue of genuine concern for line agencies heavily involved in regulation, where the dominant discourse focuses on reducing the burden of red tape and the causes of over-regulation but neglects the need to build and improve the capacity to cope with regulatory complexity. The issue of building capacity to manage and operate within a diverse and ever changing regulatory environment has received little attention from central agencies and COAG. In their discourse, regulation is still regarded with some suspicion and efforts to promote a positive agenda of working with regulation are less likely to be vigorously supported (McConkey and Dutil 2006). What is necessary is the introduction into Australian jurisdictions of ‘Capability Reviews’, similar to those being undertaken of key government departments in the United Kingdom (Cabinet Office 2006). These reviews examine current and future demands on departments and look at their capacity to manage and respond to changing circumstances and demands. The reviews are focussed on future needs and examine how customers and stakeholders are engaged in the design and management of service delivery and the related regulatory models. An examination of regulatory capability might also involve extending the assessment of an agency’s capability to include an assessment of the overall capacity of the sector. Such a review would look at the constraints or barriers for key participants (public and private) to successfully engage and comply with regulatory arrangements that govern behaviour and the rules of operation and engagement.

Many commentators have observed an incremental centralisation of regulatory reform agendas over recent years (Quiggin 2006; Patty 2006). The recent High Court decision on Commonwealth powers in respect to industrial relations saw a flurry of commentary expressing concern with the growing centralisation of Commonwealth power and the need to reform the federation (Debus 2006; Lynch 2006; Dick 2006). Twomey and Withers (2007) present a comprehensive argument as to what they regard as the negative economic and social consequences of such centralisation of power in the Australian federation. A key theme is their concern with what they see as a growing Commonwealth interest in the detail of policy, an area that has traditionally been managed by states. This is a process Twomey and Withers refer to as ‘opportunistic federalism’ (2007: 5) and is evident in the shifting of COAG’s interest from system wide issues of institutional arrangements to more specific reform targets that shape the rules and patterns of interaction on matters of detail in various policy sectors. In this context, the Commonwealth, drawing on its authority and financial strength, has shaped the COAG agenda to reflect its increasingly centralised, political and policy interests (Twomey and Withers 2007). COAG’s focus on detail seems to have distracted it from the more strategic issue of how regulatory institutions and processes of governance influence the operational capacity and compliance levels of stakeholders and participants in key policy sectors.

In land transport, as in other sectors, there exist well established systems for handling the detailed matters of inter-jurisdictional coordination and cooperation, such as Ministerial Councils and their supporting forums of chief executives from government agencies. In the late 1980s and early 1990s pressure for microeconomic reform saw heads of government become increasingly involved in steering inter-jurisdictional reform agendas in several key policy sectors. In land transport, for example, central agencies and, ultimately, COAG, took a strong lead in shaping institutional arrangements for regulatory reform, leading to the 1991 Intergovernmental Agreement that established the National Road Transport Commission (NRTC) (Painter 1998). However, what is important to note is that while central agencies were critical in pushing the establishment of the NRTC, they did not shape the details of the reform agenda and resulting work. This arose out of the detailed work and proposals of the various road and transport agencies (Wilson and Moore 2006). The success of the NRTC as a model for progressing regulatory reform was acknowledged in 2004 when its mandate was expanded to include rail and it was renamed the National Transport Commission (NTC).

However, in 2006, COAG once again became involved in land transport reform but this time announcing a far more detailed approach to reform with a set of specific targets and timelines. In particular, it requested the simplification of rail safety regulation by December 2006, with a program of work specifically targeting accreditation guidelines, safety management system requirements, disclosure of information and the management of fatigue amongst rail workers (NTC 2006). This recent interest by heads of government in the operational detail of policy represents a shift from the 1991 approach, where the focus was on developing appropriate institutions and accompanying frameworks for progressing reform, not operational detail. It also continues to neglect the question of improving our regulatory capacity to deal with complex systems.