Decision ris proposal for national licensing of the property occupations

1.Costs and benefits of the automatic mutual recognition option

Automatic mutual recognition could achieve some of the same labour mobility benefits as national licensing, as it would enhance the ability for some labour to flow where property occupations are most needed and would reduce administrative and financial costs in the form of additional fees where licences are held across jurisdictions. Some of the transition costs incurred under national licensing would also be relevant under automatic mutual recognition. For example, licensees intending to work interstate would need to spend time understanding the new licensing system and government would incur communications costs in informing licensees of the changes.

While national licensing seeks to reduce the number of categories, there is no mechanism or compulsion under automatic recognition to make such changes. Automatic recognition retains individual jurisdictions’ licensing frameworks and for that reason involves a lower transition cost to that envisaged under national licensing.

Automatic mutual recognition – unharmonised approach

Under this approach, a licence holder would automatically be allowed to perform the scope of licensed work authorised by their jurisdiction-based licence across all jurisdictions regulating that work, without applying for an additional licence or paying an additional fee. The regulated work and licence type would not be harmonised or made consistent in any way. It would be the responsibility of the licence holder, regulator and employer to understand the licensed work authorised by a licence issued by any jurisdiction. Unlike existing mutual recognition arrangements, the licence would not be ‘translated’ into the regulatory terms of the jurisdiction of operation. It could therefore be expected that compliance monitoring would be substantially more difficult for regulators and there would be a risk of licensees working outside their scope of work in second jurisdictions, potentially affecting consumer protection and health and safety.

This option is similar to the arrangements that apply to a driver’s licence, where a licence in one jurisdiction entitles the bearer to drive anywhere in Australia. However, it should be noted that the standard automotive driver’s licence arrangement works because the regulated work – driving – is essentially the same in all jurisdictions. The different approaches to the licensing of the property occupations mean that the various types of regulated work are significantly more varied than driving.

The 2009 Decision Regulation Impact Statement on the National Licensing System for Specific Occupations noted that, on examination, an unharmonised approach would not address issues of consistency or transparency, would increase the level of complexity for individuals and businesses (in understanding jurisdictional licensing and conduct differences) and has the potential to increase consumer confusion. It further noted that there are potentially perverse impacts on consumer protection outcomes by undermining the integrity of jurisdictional regulatory regimes and increasing the potential for jurisdiction shopping. It indicated that there was a significant risk that regulators would lose confidence in arrangements over time.

State and territory autonomy would be maintained and transition and implementation costs would be minimised under an unharmonised model. Jurisdictions would retain the legislative power to vary licensing requirements to meet circumstances arising in particular states over time.

While labour mobility is an important objective of national licensing, the benefits derived from national licensing could be partly achieved by automatic mutual recognition as it too would enhance the ability and attractiveness for some labour to flow where refrigeration and air-conditioning services are most needed.

The potential transition costs of this option include:

• 
  time for licence holders to understand changes in licensing arrangements (i.e. how automatic mutual recognition works)
  
• 
  government communications costs
  
• 
  government compliance costs, where regulators are required to change their compliance arrangements to ensure that they are able to regulate for new licence holders working in their jurisdiction under automatic licences (this is both a transition and an ongoing cost)
  

In order to fully quantify and assess the impacts under this option, further guidance from governments on option parameters and available data would be needed. For example, the following information would be needed:

• 
  information on the extent to which transition costs that have been estimated for national licensing may need adjusting to reflect differences in this option information from jurisdictional regulators on the costs associated with additional compliance
  
• 
  information on the cost of the register of disciplinary actions, including information on the potential scale of this register, and how it may work with existing arrangements.
  

Table 4.32 shows the potential impacts under national licensing that could also occur under an unharmonised model of automatic mutual recognition.

Table 4.32: Potential impacts under an unharmonised automatic mutual recognition model

Potential impacts	National licensing option impacts	Likelihood of achieving national licensing benefits under AMR* (per cent)	AMR impacts
Ongoing impacts ($ million per annum annualised over 10 years)
Impacts that would occur for those holding equivalent licences
Labour mobility	22.97	50	11.49
Removal of the need to hold multiple licences	2.27	100	2.27
Removal of the need to hold multiple licences – government	(0.92)	100	(0.92)
Removal of requirement for continuous professional development	36.99	0	0
Real estate agents – qualification changes	1.56	0	0
Licensees undertaking both real estate and business agency work – qualification changes	(0.06)	0	0
Agent’s representatives – qualification changes	12.27	0	0
Strata managers – qualification changes	(0.03)	0	0
Auctioneers – qualification changes	0.35	0	0
Maximum licence period of 5 years	8.00	0	0
Agent’s representatives in Victoria – increasing frequency of processing	(0.19)	0	0
Other ongoing benefits ^a	0.76	0	0
Business value-add	13.61	**	0.09 (a)
NOLA Operational Costs	(1.12)	0	0
Total Ongoing Impacts – benefits	96.66		12.93
Transition impacts ($ million)
Time for licensees to understand reforms	(8.35)	25	(2.09)
Government communications	(1.95)	25	(0.49)
NOLA – set-up costs	(1.31)	0	0
National licensing register – jurisdictional implementation	(4.06)	0	0
Business value-add	(2.78)	**	(0.70) (b)
Total Transition Impacts	(18.46)		(3.28)
Other potential impacts not yet quantified
Impacts on government compliance costs and associated administrative costs	Not quantified		Higher than national licensing
Costs and benefits of a register of disciplinary actions	Not quantified		Not applicable
The removal of additional eligibility requirements such as age requirements	Not quantified		Not quantified

^a Other ongoing benefits include the following impacts: ‘removing experience requirements’, ‘removing advertising requirement’ and ‘reducing personal probity requirements.’

* 0% - No Impact - Where the likelihood of achieving a benefit of 0% is outlined, it is not expected that AMR would provide for the benefit to be delivered. For example, there would be no requirement for decreased qualifications under an unharmonised AMR system meaning that there would be no reduction of costs in this area;

25% - Very unlikely - Where the likelihood of achieving the same cost/benefit of 25% is outlined, it is considered very unlikely that AMR would provide for the any significant degree of the benefit or cost to be accrued. For example, the costs of communication would be significant less as the changes to the system would be minimal compared to the current mutual recognition arrangements;

50% - Unlikely = Where the likelihood of achieving a benefit of 50% is outlined, it is not expected that AMR would provide for half of the benefits/costs to be accrued but delivered. For example, the costing estimates that half of the benefit accruing from enhanced labour mobility would flow through under an unharmonised AMR system. This is because the regulated work and licence type would be continue to be whatever individual jurisdictions determine – it would not be harmonised or made consistent in any way. It would become the responsibility of the regulator and licence holder to understand the licensed work authorised by a licence issued by any jurisdiction as, unlike under existing mutual recognition, the licence would not be ‘translated’ into the regulatory terms of the jurisdiction of operation. It is expected that these complexities would continue to mitigate against labour mobility to a significant extent;

75% - Likely - Where the likelihood of achieving a benefit/cost of 75% is outlined, it is expected that AMR would provide for the much of the benefit to be delivered; and

100% - Full Impact - In these occasions, it is estimated that the same benefit/cost would flow regardless of the model being implemented. For example, under an unharmonised AMR system it is still envisaged that the need for multiple licenses will be eliminated (as it would with national licensing).

** Under AMR, business value-add will only accrue for those impacts that are likely to occur under the AMR option.

(a) The only ongoing impact likely to occur under AMR that leads to business value-add is ‘Removal of the need to hold multiple licences’. This is the business value-add associated with that impact.

(b) The only transition impact that leads to business value-add is ‘Time for licensees to understand reforms’. As only 25 per cent of this impact is expected to be incurred under AMR, only 25 per cent of the associated business value-add would be incurred under the AMR option.

Automatic mutual recognition – harmonised approach

To manage regulatory differences, jurisdictions could agree to harmonise licensing requirements. This could be undertaken initially where equivalence is more easily determined, or based on updated ministerial declarations of equivalence. The substantial work already undertaken in relation to the development of proposed national licensing arrangements could be used as a basis for this.

This approach would need to have a mechanism to facilitate harmonisation across jurisdictions. This could be managed through either dedicated resources (for example a funded body) or managed by a committee of officials representing jurisdictions. It is likely that, in the absence of a funded national coordinating mechanism, harmonisation would be difficult to achieve, and hard to maintain over time as there would be no process to resolve differing jurisdictional views.

Jurisdictions would retain the legislative power to vary licensing requirements to meet circumstances arising in particular states over time. This would have the potential to undermine any agreed equivalency, increase complexity and create uncertainty in jurisdictions which had not issued the licence. While there is a similar potential under the proposed national licensing arrangements for variation in licensing arrangements (for example the IGA includes provisions for jurisdictions to not adopt licence where that work is not licensed), there are limited structural arrangements or requirements (such as the IGA and National Law for National Licensing) which would work to contain differences over time.

Legislative change would be needed to the Mutual Recognition Act to allow recognition of business entities, and to jurisdictional legislation. Licence cards from different jurisdictions could contain different levels of information, causing uncertainty for consumers unless this was made more consistent. A national register of disciplinary actions would improve transparency for consumers and regulators alike but would need to be agreed and established. Such a register would not provide the full national register of information proposed under the proposed national licensing register and a process would need to be developed surrounding who would provide, maintain and service it, and agreement would be needed on how it would be funded.

If harmonisation was introduced as a staged process, with clearly equivalent licences included first and others left outside the system, temporarily or perpetually, further confusion could be created. For licences where no equivalence had been agreed, current mutual recognition requirements would need to continue.

Potential Impacts

It is difficult to fully estimate the cost of a harmonised automatic mutual recognition system as it is unclear which elements of the licensing system would be subject to harmonisation, which elements would actually be harmonised by jurisdictions, and how the harmonisation process would be managed.

There is the potential for an automatic mutual recognition model to capture some of the benefits that have been identified under national licensing but the extent of benefits achieved would depend on the level of agreement between jurisdictions. It is also clear that a harmonised system has the potential to increase labour mobility from that which is likely to be achieved under an unharmonised automatic recognition system.

Overall, it is expected that the benefits from a harmonised AMR arrangement would have benefits greater than a non-harmonised system ($12.93 per annum) but less than those expected from national licensing (net benefits of approximately $96.66 per year).

When examining what additional benefits can be achieved between the non-harmonised and harmonised AMR models for the property occupations, there is likely to be some additional benefits under a harmonised system flowing from:

• 
  exempting certain non-residential property transactions
  
• 
  the removal of compulsory professional development in some jurisdictions
  
• 
  reduced entry level qualification in some jurisdictions
  
• 
  removal of the requirement for advertising an intention to gain a licence
  
• 
  removal of experience requirements.
  

Further benefits may also be achieved across jurisdictions if consistent licence periods were adopted.

It should be noted that benefits would only flow in relation to the extent that jurisdictions were able to agree on harmonisation which resulted in a deregulatory outcome.

There would also be transitional costs for the establishment of such a system. As stated above, it is difficult to fully estimate these costs given that further consideration would be needed as to how system development and implementation would be managed. It is expected there would be costs in relation to information provision to licensees, communications and the establishment of a register. While this model would not require the establishment of NOLA, it would nevertheless require the establishment of a state/territory mechanism to develop implement and maintain the licensing arrangement under this model. It is recognised that the work undertaken as part of the work to develop a national licensing system would contribute to the establishment of a harmonised automatic mutual recognition system and would minimise some system development costs.

Conclusion

Automatic Mutual Recognition is an alternative model for reform of licensing arrangements which has the potential to deliver some benefits to licence holders and the economy more broadly. It would deliver arrangements that go some way to promoting labour mobility but will not deliver the same level of benefits as the national licensing model proposed.

National licensing has been estimated to deliver net benefits of approximately $96.66 per year. An estimate of the benefits delivered by an unharmonised AMR system is estimated to be $12.93, and there would be fewer transitional costs. It is difficult to estimate the benefits accruing from a harmonised mutual recognition system as it not clear as to what elements of any proposed system will be subject to harmonisation across all relevant jurisdictions. It is likely to deliver higher benefits than a non-harmonised system but fewer than the proposed model under national licensing.

A discussion of the merits of the automatic mutual recognition approach is also presented in Chapter 2.