In recent years, I’ve observed a concerning trend among governments in Australia and around the world: a growing propensity to overreach. Unnecessary regulations, soaring compliance costs, and the stifling of innovation have become hallmarks of modern governance. This shift is damaging not only to businesses but also to the communities and economies these businesses support.
Let me be clear: regulation has its place. It can protect consumers, foster fair competition, and ensure public safety. But when governments act as though they hold the monopoly on solutions, they miss a fundamental truth — the most innovative and capable entities are often found outside the halls of power.
As Nobel Prize-winning economist Milton Friedman famously stated, “The great achievements of civilisation have not come from government bureaus. Einstein didn’t construct his theory under order from a bureaucrat. Henry Ford didn’t revolutionise the automobile industry that way.” Governments should recognise this reality and shift their focus from controlling to enabling private enterprise.
The Cost of Overregulation
Each new regulation — no matter how well-intentioned — adds complexity. Businesses must invest time and resources to adapt, often at the expense of innovation and growth. When governments introduce sweeping changes across multiple industries in short periods, the impact is exponential:
- Workforce strain: Constantly shifting requirements force companies to divert resources into compliance training rather than upskilling their teams for future growth.
- Customer uncertainty: Unpredictable regulatory changes can confuse or alienate customers, especially when industries struggle to maintain service consistency during transitions.
- Reduced funding and profitability: Higher operational costs and regulatory risks deter investors, shrinking the pool of funding available for innovation.
- Weakened competitive forces: Smaller players with fewer resources are disproportionately impacted, reducing healthy competition and driving consolidation.
This domino effect is not hypothetical — it’s happening now, and the consequences are rippling across industries.
Learning from the Greats
Thomas Sowell, another revered economist, wrote extensively about the unintended consequences of government intervention. He argued that policymakers often fail to account for the complexity of economic systems. Sowell’s insights ring true today: when governments overregulate, they create bottlenecks in industries that would otherwise flourish under more flexible conditions.
Take, for instance, Australia’s energy sector. Overlapping regulations across renewable energy, traditional power sources, and emerging technologies have created a fragmented and uncertain market. Instead of fostering innovation, the sector has been bogged down by red tape, leaving businesses — and consumers — in limbo.
A Better Path Forward
Governments must change their approach. Instead of dictating terms to private enterprise, they should:
- Simplify regulation: Focus on clear, outcome-based rules that enable innovation while addressing genuine risks.
- Enable collaboration: Work with industry leaders to co-create solutions that balance economic growth with public interests.
- Adopt a long-term view: Avoid implementing rapid, sweeping changes without understanding their broader implications.
- Prioritise the private sector’s role: Acknowledge that businesses, not bureaucracies, are the primary drivers of innovation, economic growth, and employment.
In short, governments need to act as facilitators, not roadblocks.
The Role of Business Leaders
It’s also incumbent on us as business leaders to push for change. We must advocate for smarter policies that enable growth and innovation. The insights we bring from our industries are critical to shaping better outcomes — not just for our businesses, but for society at large.
Governments don’t have all the answers. But by recognising their limits and empowering private enterprise, they can unlock the true potential of our industries and economies. As Friedman once said, “The society that puts equality before freedom will end up with neither. The society that puts freedom before equality will get a high degree of both.”
It’s time to reclaim that freedom — for businesses, for innovation, and for the future.
