22 Government–business relations

Michael de Percy and Heba Batainah

Key terms/names

capitalism, co-design, co-governance, corporatism, disruption, globalisation, industry policy, liberalism, protectionism, regulation

The importance[1] of the relationship between government and business is best captured in a rhetorical question: What is more important: strong government, prosperous business or civil society? The question is rhetorical because there is no correct answer. Strong government is necessary to provide a system of law and order; however, without prosperous businesses to pay taxes, it is difficult for government to collect the funds to perform its role. And civil society is necessary to hold governments and businesses to account; but if we take a Hobbesian[2] view of human society, civil society cannot exist without strong government undertaking many essential roles, including political representation, public provision, and maintaining law and order, defence, public safety, regulation, infrastructure and trading relations. Of course, in a modern economy, all three institutions are necessary to ensure a society has an appropriate level of stability, security and living standards for its members.

Although in times past the study of government–business relations focused on the nation-state, the phenomenon known as globalisation has had a significant impact on the way governments and businesses interact in the global economy.[3] Nevertheless, nation-states remain the legitimate political power within their jurisdictions, and global businesses operating within these jurisdictions are still subject to the laws of the host nation-state. In practice, the government–business relationship is influenced by national institutions and cultures and, in line with changing societal values and interests, remains necessarily dynamic.[4]

This chapter discusses the various aspects of government–business relations in the context of the capitalist economic system. It outlines the sectors of the economy, introduces the levels of analysis for understanding government–business relations and discusses the various ways that governments and businesses interact, before considering industry policy and the regulation of business. The chapter concludes with a discussion of some of the emerging issues for government–business relations, including the impact of disruptive technologies.

Sectors of the economy

A central feature of the capitalist economic system is the idea of the market. The term ‘market’ can mean many different things, such as a physical space where goods and services are bought and sold (e.g. a shopping mall) or even a virtual space where the sale and purchase of goods and services is conducted completely online (e.g. eBay). The market is the incentive mechanism for the production and distribution of property, goods and services and, through ‘competitive interactions of businesses and consumers’, for the creation and dispersion of wealth.[5] Markets are often said to be ‘self-regulating’ through the laws of supply and demand, but they often require government regulation to ensure fair competition, prevent market abuse and provide a safety net (e.g. for the elderly and people with disabilities who are not able to participate actively in market relations).

In terms of typologies, markets can be classified into four broad categories: markets for goods and services, financial markets, markets for the sale and purchase of land and property, and labour markets, where employers and employees negotiate salaries and wages for work performed. Capitalist economic systems, and markets in particular, have an expansionary tendency.[6]

Economic activity within the capitalist system can be divided into three interrelated spheres of activity: the ‘for-profit’ private sector, government and the public sector and the civil society or not-for-profit sector. Although these spheres intersect in various ways in practice, the division of the sectors can be understood in terms of the legal standing of entities within each sector and their sources of revenue. For example, government agencies form part of the public sector and are established by various Acts of parliament; their major source of funding is tax revenues. Businesses form part of the private sector, are established, under the relevant laws, through articles of association and the investment of private funds to conduct commercial activity, and are funded by profits created through the production and sale of goods and services. The civil society or not-for-profit sector is funded by donations and gifts, and provides philanthropic, charitable or welfare services that are not provided by government or business and are designed to deliver some social benefit to members of the community.

In practice, the division between the three sectors is dynamic. Civil society organisations, locally, nationally and globally, often seek funding from government and business and may even enter into partnerships with the other sectors in performing their role. In Australia, for example, the former Commonwealth Employment Service, which provided job recruitment and search services for employers and employees, was replaced by a competitive network of private and civil society employment-sector providers (initially Job Network, then Job Services Australia, known as Job Active since 2015). In this case, as in others, the delineation between the three sectors is far from clear – the sectors tend to overlap in terms of funding sources and activities. Nevertheless, the underlying purposes of each sector remain an important conceptual framework for understanding the capitalist economic system as practised in nation-states. The various relationships between the sectors differ depending on local values, interests, cultures and circumstances, despite the homogenising effect often attributed to globalisation.[7]

Levels of analysis

There are three main levels of analysis that are useful in understanding government– business relations globally or within a nation-state. The macro level considers historical institutional choices and preferences at the national level and provides a general guide to the ‘proper’ role of the state in the market and in various sectors of the economy. The meso level considers government–business relations at the industry or sectoral level. This level of analysis is covered in detail in the sections on industry policy and regulation below. The third level of analysis is the micro level, which considers government–business relationships at the level of individual firms or projects.

At the macro level, the different ways that capitalism is practised within nation-states is often referred to as ‘varieties of capitalism’.[8] These differences stem from the intersection of economic and political institutions within nation-states, where institutions are defined as the formal and informal values, rules, routines and procedures that influence behaviour through what is considered by a given society to be ‘appropriate’.[9] Hall and Soskice[10] differentiate between two main types of capitalism: liberal market economies and co-ordinated market economies. In liberal market economies, such as Australia, Canada, the USA, the UK and New Zealand, firms tend to operate at arm’s length from other firms and governments, and interact through competition and formal contracting. In many ways, the ‘invisible hand’ of the market is left to guide the equilibrium of supply and demand of goods and services.[11] In co-ordinated market economies, such as Germany, Japan and Sweden, on the other hand, firms tend to be more collaborative in their relationships, and interactions with other firms and governments tend to be more strategic in attaining equilibrium in supply and demand.

While the macro level is useful in understanding comparative differences between countries in general, it is inherently weak in analysing what occurs at the meso or industry level, where practices within both liberal and co-ordinated market economies tend to be more diverse. For example, Australia’s market economy is relatively young, in comparison to the market economy of the USA, with many Australian industries either entirely owned by governments (such as the postal, telecommunications and energy industries) or heavily subsidised by governments (such as the agricultural, mining, textiles and automotive manufacturing industries) until market reforms were introduced in the 1970s and 1980s in line with international trends. Further, Australia’s health and education sectors, although increasingly subject to competitive pressures, remain predominantly government-owned or controlled, underpinned by social expectations that governments will continue to provide or fund these services. If we take the two extremes at either end of the varieties of capitalism spectrum – the competitive market economy of the USA on the right and Sweden’s co-ordinated market economy on the left – Australia tends to fit somewhere in the middle, with competition occurring in some sectors of the economy and greater co-ordination occurring in others.[12]

The micro or firm level of analysis is typically adopted to examine the behaviour of firms in the political economy, such as participation by firms in business associations, strategic choices by firms in different policy environments, or to assess the extent of political activism by firms.[13]

While the scholarly study of government–business relations in the Australian context has been largely situated as a sub-field of policy studies, it is inherently multidisciplinary.[14] The different levels of analysis place greater emphasis on different aspects of the government–business relationship, encompassing international political economy at the macro level, policy studies at the meso level and business studies at the micro level. Understanding the levels of analysis can be useful in researching different aspects of government–business relations, broadening the potential field of academic literature that can be drawn upon for research and in formulating theories at the grand (highly abstract), middle-range (typically the result of a research project) and narrow-range (used to guide practice) levels.[15]

Government–business interactions

A number of scholarly disciplines have contributed to our understanding of how governments and businesses interact. For example, Jacoby[16] listed a variety of ways that government–business interactions occur in practice. Governments may attempt to stabilise the economic environment for businesses; subsidise some industries; promote business abroad; finance small and minority firms; purchase military hardware and other products from businesses; enter into joint or mixed ventures with businesses; tax businesses and make businesses tax collectors (such as the current arrangements for the Goods and Services Tax); regulate particular functions of businesses; engage in joint management of public utilities (such as ActewAGL); and sell postal services, power, government publications, police and fire protection, and many other commodities and services. Businesses, on the other hand, may consult with government informally or individually, or formally and collectively, through lobby groups such as the Business Council of Australia or through specialist lobbying firms; support political candidates financially or in other ways; or publicly criticise governments in an effort to influence the policy agenda (such as the Minerals Council of Australia’s campaigns against the Rudd government’s mining super-profits tax and the Gillard government’s carbon pricing scheme). Businesses may also launch campaigns against government policies through advertising and other forms of public appeal. Increasingly, businesses and executives lobby governments and make public appeals on issues that do not necessarily relate to the financial interests of their industries, such as when Qantas chief executive Alan Joyce spoke out in support of the ‘yes’ vote in the recent plebiscite on same-sex marriage in Australia.

There is a ‘rich tradition’ of the study of government–business relations at the national level in Australia.[17] Although state involvement in the market was the dominant paradigm for much of Australia’s early history, the impact of government intervention on the economy was not without its critics.[18] Coinciding with the rise of ‘neoliberalism’ and the New Right in the 1980s, Australia adopted an approach to managing the economy known locally as economic rationalism.[19] The traditional industries were no longer protected by government (the Whitlam government had started to dismantle protection during the 1970s) and would be exposed to international competition. Up to this point in time, the nature of the government– business relationship in Australia was heavily focused on industry assistance, and competition regulation had only seriously been pursued since the establishment of the Trade Practices Act 1974 (Cth).

Beginning in 1983, the market liberalisation agenda had gathered pace under the Hawke Labor government and the economy began to change significantly. Following on from the introduction of the Prices and Incomes Accords, a series of agreements between the Australian Labor Party and the Australian Council of Trade Unions, the government facilitated a tripartite, consensus-based power sharing arrangement between government, business and trade unions. This tripartite arrangement, facilitated by institutions such as the Economic Planning Advisory Council, became known as corporatism and attracted much study from government–business relations scholars.[20] A key principle of corporatism was consensus building between the three parties, with the major groups in the economy (theoretically) participating in decision making. As trade union membership represented about half of the workforce at the time, it was generally representative of the interests of labour.[21] With the election of the Howard Liberal–National (Coalition) government in 1996, however, corporatism was quickly dismantled,[22] and the decline in compulsory union membership saw union membership declining steadily from 1992 from traditional levels of almost 50 per cent of the workforce, to 14 per cent of the workforce by 2018.[23]

At the industry level, business scholars such as William Byrt[24] developed approaches to understanding the interaction between business and government by focusing on various elements of the relationship that affect business, such as regulation, consumerism, trade unions and public enterprises. There are a number of different approaches to studying government–business relations, but these approaches are much more than an analysis of the struggle for dominance between the two monsters – Leviathan (government) and Behemoth (business) – as the two tend to merge ‘in complex and specialised arrangements, producing a pattern of interaction which brings together both government and non-government bodies’.[25] One of the major industry-level studies of the ‘protective state’ and its ‘gradual transformation’ of the manufacturing industry in Australia[26] was conducted by political scientists Capling and Galligan in 1992.[27] More recently, scholars considered government–business relations in light of globalisation and found, among other things, that local practices of government–business interaction persist.[28] This means that local effects of national culture, law and ideologies and the ‘appropriate’ role of the government in the economy cannot be overlooked when considering the government–business relationship.

Although individual studies in government–business relations continue, scholarly interest in the subject has been in general decline, with many Australian universities abandoning specific government–business relations subjects by 2017. This decline has coincided with turmoil in Australia’s political leadership, with prime ministers and governments changing frequently since 2007, preventing the stable, long-term approaches to government–business relations characteristic of the Hawke and Keating Labor and Howard Coalition governments. Yet, as will be seen in the section on emerging issues below, the topic is of increasing importance. We now turn to the major elements of the government–business relationship: industry policy and regulation.

Industry policy

The term sector typically refers to the various firms that produce goods or services of a similar type, such as the mining, agricultural, manufacturing, transport, tourism and construction sectors. The term industry is usually a subclassification of a given sector. For example, the transport sector includes taxis, but the taxi industry is distinct from other transport industries due to its private, point-to-point transport focus. The taxi industry is also regulated in certain ways by the states and territories. While these distinctions are important for collecting statistics (and there are numerous classification standards), for our purposes  the term industry will be used to refer to firms that produce similar products or services and will include the policy and regulatory institutions of the state that govern a particular industry.

Generally, industries are divided into three types: primary, secondary and tertiary. Primary industries are focused on the production of raw materials and typically include mining, agriculture, forestry and fishing. Secondary industries are those that use raw materials to produce goods, such as the manufacturing, engineering and construction industries. Tertiary industries are those that produce services rather than goods, such as wholesalers, retailers and transport. They can be further classified as quaternary (knowledge, such as education, media and telecommunications) and quinary (personal services, such as hospitality, health care and recreation) industries. These types of industries are important, and the relative industry mix in Australia has changed significantly over time, with the manufacturing industries declining significantly since protectionism was largely replaced by competitive markets in the final decades of the 20th century.

Under protectionism, policy instruments were used to restrict the impact of international competition. For example, secondary industries in Australia, such as the textile, clothing and footwear and automotive manufacturing industries, were protected by tariffs (government charges that increase the cost of cheaper, imported goods) and quotas (government-imposed limits on the number of goods imported). This approach to protecting domestic industries from international competition is known as barrier protectionism. Protectionism was a major form of industry policy in Australia and elsewhere from the end of the Second World War until recently. However, beginning in the 1970s, and in the 1980s under the Hawke government, Australia’s economy, following international trends, was increasingly the subject of trade liberalisation and competition reform.[29] This meant that tariffs and quotas were reduced or removed and domestic industries, particularly the textile, clothing and footwear and automotive manufacturing industries, faced increasing international competition. By the second decade of the 21st century, cheaper labour costs overseas meant that Australian manufacturing declined and continue to decline as a result of the end of protectionism.[30]

One consequence of barrier protectionism for government–business relations was the concentration of lobbying forces from both manufacturing companies and the related trade unions. As these industries relied on government protection to prosper, both capital and labour had an interest in the ongoing success of the sector. The sunk costs of lobbying and compliance, in addition to higher wages supported by inflated prices, provided little incentive for protected industries to seek efficiencies. As international trends in trade liberalisation led to numerous free trade agreements with other nations, other heavily subsidised sectors, such as agriculture, were also subjected to competition. Debates over the benefits of free trade versus protection continue as a result of the 2008–10 Global Financial Crisis and, more recently, in the USA under the Trump administration. Nevertheless, there is bipartisan agreement that Australia has prospered under trade liberalisation, with the Department of Foreign Affairs under a Labor government admitting that:

The myth that lower tariffs destroy jobs has been debunked. Trade liberalisation has made the economy more flexible. The number of people employed in Australia in export-related activity in services such as finance, property and business services is increasing.[31]

Industry policy remains central to the government–business relationship, although as Australia continues to enter into free trade agreements under the rules-based trading regime monitored by the World Trade Organization, the types of policy instruments adopted have changed. Today, there are two major types of industry policy that are compatible with the free market: passive and anticipatory industry policy. Passive industry policy does not mean that government does not make policy for industries; rather, government focuses on establishing conditions that support competition within all industries. This may include monetary policy, establishing trade agreements that are beneficial to businesses, enacting competition regulation to prevent monopolies and other non-competitive practices, reducing taxation and compliance costs, or incentivising research and development. Anticipatory industry policy involves governments making policies that target particular industries. In anticipatory industry policy, governments attempt to stimulate or assist certain industries to achieve desired economic outcomes. This can be politically risky as it requires governments to ‘pick winners’ – in effect, to predict what will happen in the future, and attempt to stimulate and incentivise firms in a particular industry to change their market behaviours.

For example, during the 2008–10 Global Financial Crisis, the Rudd government introduced a series of industry policies designed to stimulate the economy (or ‘fiscal stimuli’). A green car initiative was introduced to subsidise the automotive manufacturing industry to develop fuel-efficient vehicles, enabling the industry to compete internationally by using Australia’s highly skilled workforce to develop sophisticated technologies. In addition, funding was provided to schools for building halls and fences (to stimulate the construction industry), subsidies were provided to householders to install roof insulation and individuals receiving education assistance or family welfare payments were given a one-off cash payment of approximately $900 to stimulate the retail sector. While not considered protectionism per se, this level of government intervention in the economy challenged the orthodoxy of the previous decades’ market reforms.

These types of intervention reflect anticipatory industry policy, where governments attempt to achieve economic objectives through direct intervention. Where anticipatory industry policy differs from protectionism, however, is that it tends to be for a specific purpose and for a short period of time. Protectionism, as practised in the postwar era, on the other hand, was a long-term, institutionalised policy designed to reduce the impacts of international competition. The Rudd government’s policies were designed to stimulate, not protect, the industry. Nevertheless, then Prime Minister Kevin Rudd wrote:

The time has come, off the back of the current crisis, to proclaim that the great neo-liberal experiment of the past 30 years has failed, that the emperor has no clothes. Neo-liberalism, and the free-market fundamentalism it has produced, has been revealed as little more than personal greed dressed up as an economic philosophy. And, ironically, it now falls to social democracy to prevent liberal capitalism from cannibalising itself.

Industry policy can be further classified into two different types (which may be either anticipatory or passive). Horizontal industry policies apply to all industries (noting that definitions in the literature vary considerably). This may include research and development, the environment, skills education, human capital, infrastructure investment, innovation stimulus and so on.[32] Vertical industry policy is targeted at particular industries. Policy instruments such as tariffs and quotas are generally considered protectionist, and therefore inconsistent with modern ideas concerning global markets. Vertical industry policies, on the other hand, are not inconsistent with the rules established by the World Trade Organization if the intervention is focused on a particular outcome in the short term.

It is not unusual for governments to use a combination of horizontal and vertical measures to bring about structural change in the economy. For example, tariffs on Australian exports of sugar were not excluded from the Australia–United States Free Trade Agreement, which meant that the Australian sugar industry would not be competitive and would require transformation to adjust to the market conditions. The Howard government introduced the Sugar Industry Reform Program to help sugar cane farmers and harvester operators cope with the loss of protection. This program included welfare payments, crisis counselling services, industry-exit assistance, business planning and diversification assistance, retraining and other funding to assist those affected by the changes.[33]

Similarly, the Gillard Labor government introduced a carbon pricing taxation scheme, which was generally horizontal in that it was intended to affect industries other than road transport and agriculture, and later become a carbon emissions trading scheme. However, the Abbott Coalition government replaced the policy with the Direct Action Plan to fund carbon emissions reduction projects through an Emissions Reduction Fund, among other ‘green’ projects.

One of the challenges for vertical industry policy is the difficulty in ‘picking winners’. Some of the outcomes from recent industry policies include:

  • The Rudd government’s Green Car Innovation Fund did little to stimulate the industry, and, once elected, the Abbott government wound up the scheme and did not support the industry further. In 2017, the last Holden vehicle rolled off the production line and car manufacturing in Australia ceased.
  • The Rudd government’s Home Insulation Program led to the tragic deaths of four workers, numerous house fires resulting from the use of poor materials, the demotion of then Environment Minister Peter Garrett, and subsequently the Royal Commission into the Home Insulation Program.
  • The Gillard government’s carbon pricing scheme was labelled a ‘carbon tax’, and a coalition of industry groups, known as the Australian Trade and Industry Alliance, launched a major campaign against it. The competition regulator, the Australian Competition and Consumer Commission, investigated complaints from consumers about false justifications for price increases, particularly electricity providers falsely claiming that the carbon pricing scheme was responsible for price rises. The Abbott government’s Direct Action Plan consisted of payments to businesses and effectively removed the cost of carbon emissions from industry and placed the burden on taxpayers.

Government–business relations in the area of industry policy have been far from ideal over the last decade. Not only have the constant changes in federal governments (and political leadership) created an uncertain operating environment for businesses, the lack of stability has also provided little incentive for businesses to invest in long-term strategy, especially in relation to environmental sustainability. We now turn to regulation, another important element of government–business relations.

Regulating business

The rationale for regulation in a market economy stems from a number of concerns. While regulation may appear to interfere with the workings of the ‘invisible hand’ of the market, in the last few decades, most developed economies have been through phases of deregulation of industries, privatisation of government services and, more recently, re-regulation to address anti-competitive behaviours, to include the cost of externalities (such as environmental, social and other related impacts) not captured in the production process or where the market has failed. Regulation involves governments making laws to influence the behaviour of firms. This can include rules to prevent anti-competitive behaviour, to protect consumers from unfair trading practices, to establish safety and other standards, and to achieve other social or economic policy goals. Traditionally, governments consult with industry in establishing a regulatory regime to support certain policy goals. Once the regulatory model has been established, it is standard protocol for regulators to enforce the relevant laws, rather than contribute to policy debates, and their major function is to protect the public interest.

There are two major approaches to regulating businesses: ex-ante (before the event) and ex-post (after the event) regulation. Ex-ante regulation focuses on the structure of markets. This may include the number of firms in a given market, the conditions for entering a market, the degree of product differentiation and so on. Ex-post regulation is mostly concerned with the behaviour of firms or the way they conduct business. This may include how a firm relates to its competitors and customers. These two approaches to regulating businesses may be used in combination. For example, to enter the telecommunications industry, firms may need a specific level of capitalisation and may be required to purchase a telecommunications carrier licence before operating in the market. Once a firm has met the requirements to operate in the market, it may then be held accountable for its behaviour according to the rules that apply within that industry. Various government and industry agencies may regulate firms concerning different issues, such as security cameras in taxis or pricing of consumer goods and services.

Types of regulation may be classified along a spectrum based on the extent of government intervention in the industry, ranging from government ownership and command and control to self-regulation and co-regulation, to incentives-based regulation designed to influence behaviours.[34] Command and control regulation involves the imposition of rules and standards backed up by criminal sanctions. Some of the advantages of this type of regulation include clear definitions of unacceptable behaviour, establishing performance standards supported by law and appearing politically decisive. Some disadvantages are that regulation can be complex and legalistic, defining acceptable standards can be difficult and the close relationship between the regulator and businesses can lead to what is known as regulatory capture. Regulatory capture occurs when the regulator begins to protect the interests of the industry itself, rather than protecting the public interest. In practice, the command and control model, at the extreme, involves government ownership of the entire industry.

At Federation, government ownership of the post, telegraph and telephone industries specifically excluded businesses from operating in these industries. Further, railways were owned by the state governments, and competition in freight services was restricted until a 1954 Privy Council decision ended the protection of the industry, paving the way for an increase in competition from other means of freight transport. It was not until the 1990s that telecommunications, electricity, gas and water services in Australia were subjected to competition. For much of the 20th century, it was believed that these industries were natural monopolies, where the economies of scale available to one entity operating in an industry provided the greatest efficiency, in that the cost of adding another subscriber or connection to the existing network was infinitesimal. Having more than one operator in such natural monopolies, it was assumed, would involve unnecessary investment and costs and therefore make the delivery of services inefficient. A step down from government ownership is a regulated monopoly. In this instance, the government establishes the rules for operating the privately owned monopoly and regulates the prices that the firm may charge (whether through price capping or limitations on the rate of return on investment). However, for the most part, natural monopoly theory has been made irrelevant by improvements in technology, particularly billing systems, and most utilities today are delivered via a competitive market.

In the telecommunications industry, for example, the regulatory framework uses a variety of different approaches to achieve the desired policy outcomes. For instance, the Department of Communications and the Arts (a government department) provides policy advice to the minister for communications for the telecommunications industry. Through legislation, the parliament establishes regulations for the telecommunications industry. The Australian Communications and Media Authority (ACMA) (a statutory authority) enforces the rules for entry into the telecommunications market and issues the relevant licenses (ex-ante regulation), the Australian Competition and Consumer Commission (ACCC) (a statutory authority) has a role to assess the impact of mergers and acquisitions (ex-ante) and a particular role for addressing anti-competitive behaviour (ex-post regulation), while the Telecommunications Industry Ombudsman (TIO) (an external ombudsman funded by the industry) deals with consumer complaints that are not resolved by the firm (ex-post regulation). In this case, the ACMA regulates using a command and control approach, the ACCC uses command and control in making decisions about its roles, and the industry, through the TIO, self-regulates (and funds the regulator) and agrees to abide by the decisions of the ombudsman.

Incentives-based regulation might include additional taxes to reduce the consumption of certain goods, such as those currently applied to tobacco products, or market-based instruments, such as a carbon emissions trading scheme. In a typical carbon emissions trading scheme, the government caps the allowable level of pollution and sells permits to businesses to pollute to that level. Businesses can then trade these permits with other businesses. In theory, as the price of permits increases, businesses will innovate to reduce their carbon emissions, thus gaining a competitive advantage over businesses that still need to pay for the pollution they generate. Other market-based mechanisms include the auction of radio frequency spectrum to mobile telephone, radio and television providers, or the provision of subsidies to encourage particular habits or activities under the Direct Action Plan, discussed above.[35]

Self-regulation occurs in many areas of private-sector activity, such as media and advertising, and many crucial professions, including the law, medicine, accounting and taxation services. Self-regulation places the onus of maintaining standards on the industry body, such as Ad Standards and the regulation of television advertising, and often includes tribunals and complaint mechanisms where alleged abuses can be aired and investigated. Participants in self-regulated areas of activity in essence agree to their behaviour and actions being monitored by their industry peers and to accept any punishment or redress awarded by whatever tribunal is empowered to consider disputes or complaints.

Each approach to regulation has its merits, and different mixes of approaches and types are used in different industries. An emerging idea in the regulation of businesses is regulatory co-design,[36] where governments and industry collaborate. Although there is some risk of regulatory capture, the approach can be useful in industries where technology is moving rapidly, or where the industry accepts that regulation is necessary but a suitable regulatory framework has not been established. One example of this approach is currently being trialled in the road transport industry. As heavy vehicles cause the most damage to the road network, a system of user charging has been in place for some time, but it is still some way from capturing the external costs of road damage. Working with the industry, the Department of Infrastructure, Regional Development and Cities has implemented the National Heavy Vehicle Charging Pilot. In the near future, various pricing options, which might include a reduction in fuel excise and vehicle registration fees, will be ‘mock billed’ and tested by road transport businesses, with a view to testing the new system on an opt-in basis paying with ‘real money’. Technology is enabling such opportunities to improve regulation, but it can introduce new problems for government–business relations, which we discuss in the next section.

Emerging issues – disruptive influences

The taxi industry in Australia was one of the last regulated monopolies to be subjected to market liberalisation and disruptive technologies. As late as 2013, a report on the Victorian taxi industry made no mention of the emerging ride-sharing industry led globally by Uber, a multinational corporation. Ride-sharing businesses are part of the growing sharing economy, where individuals use their private assets, such as their cars or their houses (with businesses such as Airbnb), to sell services using proprietary smartphone ‘apps’ that provide the marketing and billing systems. While the Australian Capital Territory anticipated ride-sharing and reformed the taxi industry, the states did not. Allegedly, Uber began operating throughout Australia despite laws prohibiting unregulated businesses from operating in the point-to-point transport industry. This presented a complex problem for the state governments. Consumers wanted to use ride-sharing because it was cheaper and there was a perceived lack of customer service from the existing regulated taxi operators. Governments were forced to reform the industry, resulting in protests from taxi operators, many of whom saw the value of their investment in taxi licences reduced significantly with little time to adjust to the changing conditions. State governments were forced to compensate taxi licence owners and to implement packages to ameliorate the effects of industry disruption. Taxi operators have commenced a class action against Uber seeking further compensation for lost business.

Unlike the approach adopted with sugar industry, the taxi industry disruption was almost a complete surprise to regulators and taxi operators alike. This level of disruption could have been avoided had the reforms been introduced years before, but neither government nor the industry was prepared. The most striking part of the introduction of ride-sharing was not so much the advances in technology, but the way that the technology has been used globally to disrupt traditional industries. While other jurisdictions have attempted to ban ride-sharing operators, consumer demands are forcing governments to enable new services, thus challenging the command and control approach where it matters most – at the ballot box.


Businesses in Australia are becoming increasingly involved with the public and civil society sectors in complex ways, and the government–business relationship is increasing in importance. However, political instability, along with disruptive technologies, mean the future of this relationship is uncertain. Further, emerging social and political issues, such as the failure of affirmative action laws to address gender inequalities in pay and the number of women in leadership positions in the workplace, indicate that governments cannot solve these problems in isolation. In the midst of decreasing trust in government in Australia, increased citizen participation in policy making is seen as one way to improve the legitimacy of government by bringing businesses and citizens into a system of co-governance. Yet after a decade of political instability, and recent events suggesting that the instability will continue, a significant departure from traditional approaches to government–business relations is politically risky. While the study of government– business relations may have peaked in the 1990s, it seems time for a revival of this important field in political studies.


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About the authors

Dr Michael de Percy is a graduate of the Australian National University (PhD) and the Royal Military College Duntroon (Artillery Prize 1993), a Fellow of the Chartered Institute of Logistics and Transport, and a member of the Australian Nuclear Association. Michael was appointed to the Australian Research Council’s College of Experts in 2022.

Dr Heba Batainah is assistant professor in politics and international relations at the University of Canberra, where she teaches leadership, public policy, social policy and Australian and Middle Eastern politics. She is a graduate of the Australian National University (PhD) and the University of Canberra (BPhil Hons – First Class, BMgmt, BBusAdmin) and a fellow of the National Security Institute.

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