Red Tape Isn’t the Problem. The System That Creates It Is.

Series note: This series examines how decisions are actually made — not to excuse outcomes, but to understand them accurately.

By Aiden Garrison

I’ve written about the people making decisions you never voted for. About systems that protect themselves. About incentives that produce outcomes nobody officially intended.

This is what that looks like in practice.

A café owner in Victoria can require dozens of separate licenses before opening. A plumber in Queensland can face multiple permits just to carry out work across state lines.

That is not bureaucracy gone wrong. It is bureaucracy operating as designed.

This week, industry groups called for a 25 per cent reduction in unnecessary regulation by 2030. It is a reasonable ask. It will likely produce a taskforce, a report, and a modest set of reforms that leave the underlying problem largely intact.

Because that is what tends to happen.

Red tape reduction has been a policy priority of successive governments for decades. The red tape continues to grow. At some point, the question stops being why it cannot be fixed and starts being why the system keeps producing it.

The answer is not incompetence. It is incentive.

Every regulation exists because someone with the authority to create it did. Every licence requirement was designed by a department with a reason to design it. Every approval layer was built by an institution that benefits from its own relevance.

The system does not generate red tape by accident. It generates red tape because red tape is how the system justifies itself.

While that is happening at street level, while the café owner works through another approval, something very different is happening at the top.

In 1999, the capital gains tax discount was introduced. Instead of taxing gains adjusted for inflation via indexation, as under Hawke and Keating, investors became eligible for a 50 per cent discount on assets held for more than a year.

The stated intention was to simplify the system and encourage investment.

What it did in practice was entrench a structural advantage for those who hold assets over those who rely on income.

A wage earner pays full tax on every dollar earned. An investor who sells an asset held for just over a year pays tax on only half the gain. The larger the asset, the larger the concession. The more capital held, the more the system works in your favour.

That is not an accident. It follows the same design logic as the red tape. Both are built within the system, and both reflect the outcomes the system rewards.

Both are justified in similar terms. Productivity. Economic outcomes. Growth. Competitiveness.

But the pattern is consistent.

Complexity accumulates at the bottom. Concessions accumulate at the top. The small business owner deals with process. The asset holder benefits from policy that compounds quietly, year after year, without attracting sustained attention.

the gap between them widens.

That is the part often missing from the policy debate. The discussion is framed around what is good for the economy, what drives growth, what improves outcomes.

But growth for whom?

Because the system has been producing outcomes for decades. They are just not the outcomes being described.

Asset holders accumulate more. The capital base expands. The small business owner works through another requirement. The wage earner pays in full.

And every few years, a new round of reform is announced.

A taskforce is formed. Targets are set. The red tape continues to grow.

The discount remains where it is.