Employers call for regulatory reform to counter rising business costs

Critical for unlocking investment and productivity growth is a national focus on regulatory reform this year, industry leaders have said.

Three defining industry pressures

Based on its 13th annual report, Australian Industry Group Outlook Survey, Ai Group identified key pressures that will define 2026. In the report, the return of inflation – causing input and energy costs to continue to rise – is damaging to businesses that struggle with overheads while market conditions remain weak. This will put pressure on margins, and constrain investment opportunities, Ai Group said.

In addition, the burden of taxation and broader regulations is emerging as a leading detriment to business growth, it found. Persistent workforce pressures, such as rising wage costs and talent shortages, which exist mostly for higher-skilled roles, add additional strain to the balance sheets of many businesses, the survey revealed.

Low growth could become ‘entrenched’

The results revealed modest optimism for revenue and employment, but an overall weak sentiment, with 40 per cent of leaders expecting business conditions to deteriorate this year. Ai Group chief executive Innes Willox (pictured) said industry leaders believe that without regulatory reform, the “higher-cost, lower-growth business conditions” could become “entrenched”.

Thirty-seven per cent of leaders cited tax burden, and 33 per cent cited compliance burden as having negative impacts on their businesses, the survey revealed.

“Mounting regulatory burdens are adding to cost pressures at a time when business can least afford it. No amount of tech investment can compensate for poorly designed regulation or uncompetitive tax settings,” Willox said.

The survey’s findings revealed that technology is the only area of investment with strong growth, as businesses are looking to improve efficiencies and lower costs amid the AI transformation.

Driving a return to productivity and robust growth

Persistent cost pressures continue to burden balance sheets, Willox stated. Organisations that plan to increase investment in technology to deliver productivity gains can help to manage the rising costs from inflation, workforce shortages or energy prices, he added.

Willox noted a “wide range” of potential reforms proposed at the Treasurer’s Economic Reform Roundtable last August and stressed that these reforms must be acted upon.

“The message from industry leaders is clear: regulatory reform is essential if we are to deliver the higher investment levels needed to drive a return to productivity and robust growth,” he said.