Australia's sharing economy stymied by over-regulation

Australia’s foray into a sharing economy is being held back by excessive government regulation, warns industry report.

Sharing economy becomes ubiquitous

Sharing economy becomes ubiquitous

Australia’s moves to join a sharing economy is being marred by a long history of stifling government regulation, warns a report by the Institute of Public Affairs.

This report The Sharing Economy says that over-regulation being crafted by government has the potential to destroy Australia’s participation in an economy being led by disruptive companies and innovation.

This disruptive road-map is spearheaded by pioneers like Uber for shared rides or Airbnb involving accommodation. A raft of similar non-traditional companies and shared services are integral to global transactions. However, Australia risks being left behind because of over-regulation and poorly-defined policies.

Among the trends, disruptive technologies slash the transaction costs of exchange. The sharing economy is marked by a better use of idle or under-utilised resources. Mutually-beneficial trade is enhanced by the more disruptive and tech-savvy companies, groups or individuals.

Stifling innovation

Despite the runaway success of sharing goods or services, the Australian landscape is stymied by over-regulation, says the Institute of Public Affairs (IPA) report.

Regulation places constraints on what exchanges can occur and the circumstances under which these occur. “The Australian government has a long and poor history of stifling innovation through regulation.”

Each new regulation on new technologies and platforms threatens a backwards step and directly reduces the gains made so far.

The IPA recommends a “default position” for regulators to help consumers and the industry engage more readily in a sharing economy. This is supported by more organic and self-regulating institutions. This approach replaces the more rigid and top-down government control.

Market dynamics

Among the incentives, markets should be left to experiment, fail, and learn by trial and error. “They will develop, test and implement effective institutional governance mechanisms. We must leave these mechanisms to test in the market so that they may iterate, improve and focus on the safety and certainty levels required by markets.”

Occupational licensing also needs to be minimised. This licensing creates barriers to entry and blocks new technologies or services.

“If occupational licensing was a relatively costless process, where government officials quickly and cheaply determined viable license holders, then the problems would be much less severe. In practice, the hurdles to receive a license tend to grow more stringent and expensive as time goes on.”

Getting in the way

Moreover, concentrated industries often canvass legislators for protection from competition. This is leveraged through artificial barriers to entry. “It is no surprise that in many – if not most – circumstances, those seeking licensing standards are already practicing professionals attempting to limit the entry of new businesses and employees.”

One of the report’s authors, Chris Berg, said that services like Airbnb, Uber, Kickstarter, Airtasker, Open Shed, and Zopa are disrupting traditional industries. These companies deliver direct benefits to consumers and producers. “They mean cheaper services, fewer middlemen, and a more sustainable use of resources.”

He added that regulators “need to get out of the way” to let market forces play out in a dynamic landscape. Regulating the sharing economy will only slow economic growth at the detriment of consumers.

Governments can consider different options to open up the markets. Among these, there are calls to re-regulate occupational licensing, enabling private certification and reputation mechanisms to evolve.

Planners can also streamline employment laws to open up independent contracting. The broader goal is to avoid industry-specific regulation that stifles entrepreneurs. Less regulation is also needed around emerging technologies and related services.

Related:Federal government signals support for crowd-sourced funds

Follow Shahida Sweeney on Twitter: @ShahidaSweeney

Tags Zopasharing economyAirbnbInstitute of Public AffairsKickstarterAirtaskergovernment regulationsOpen ShedUber

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