National Licensing for Property Occupations Consultation Regulation Impact Statement

Legislation

Corporations Act 2001

Finance Brokers Control (Code of Conduct) Regulations 2007

Land Agents Act 1994 South Australia

Mutual Recognition Act 1992

Occupational Licensing Act 2005(TAS)

Occupational Licensing National Law Act 2010

Property Agents and Motor Dealers Act 2000

Property, Stock and Business Agents Act 2002

Trans Tasman Mutual Recognition Act 1997

1 The industry also includes conveyancers and valuers, which will be covered in the second tranche of national licensing occupations.

2 IBISWorld 2012, Industry Report L7720: Real estate agents in Australia, March 2012.

3 Productivity Commission 2003, Evaluation of the mutual recognition schemes: research report, p. 40.

4 The analysis prorates for the property sector the estimates associated with labour mobility prepared by the Productivity Commission as part of its 2009 Review of mutual recognition schemes. For this estimate to be valid, the specific assumptions made by the Productivity Commission would need to hold – namely that Australia is facing a 10 per cent increase in commodity prices above normal conditions – and that these assumptions are also combined with an assumption for this analysis that mutual recognition is only 90 per cent effective in promoting labour mobility. These are strong assumptions and should be treated with caution, but are nonetheless included to provide a ‘line-in-the-sand’ estimate for consultation. For further information on these assumptions and estimates, see Chapter 4.

5 Most of the benefits are estimated for licensees, such as less time spent filling out forms. However, business also benefits. For the purposes of this analysis, and again to provide a starting point for discussion, the business benefit is assumed to be equal to one-third of the impacts for licensees.

6 The results of the economy wide modelling reflect the magnitude of the impacts estimated in the cost benefit analysis. Those impacts are assumption driven and as such the value of the economy wide modelling is in terms of how it shows the relative implications for sectors of the economy.

7Productivity Commission 2003, Evaluation of the mutual recognition schemes: research report, p. 40.

8Productivity Commission 2009, Review of the mutual recognition schemes: research report, p. 59–62.

9Allen Consulting Group 2008, Evaluation of COAG initiatives for full and effective mutual recognition.

10 If the Commonwealth is to have no legislative role in national licensing, as agreed by COAG, then this may not be possible. Changes would need to be made to jurisdictional legislation to allow certain licences in the matrices under the Act to be recognised.

11 Productivity Commission 2009, Review of mutual recognition schemes: research report.

12 Property, Stock and Business Agents Act 2002 No 66, section 3, ‘Definitions’.

13 Property Agents and Motor Dealers Act 2000.

14 Land Agents Act 1994 (SA).

15 CPP07 Property Services Training Package, Volume 1: Property development, sales and management sector, p. 85.

16 In Victoria a manager of an owners corporation, professional or otherwise, holds money ‘on trust’ for an owners corporation. This means that all fees levied by an owners’ corporation must be paid into a bank account either in the name of the owners’ corporation or the manager. The owners’ corporation must keep proper accounts of all income and expenditure, prepare annual financial statements and present these to the annual general meeting. Larger owners corporations are required to have their accounts audited.

17 Section 5 (1) (j) a person who carries out strata management agency work that consists only of maintaining or repairing property for which a body corporate or owners corporation is responsible.

18A provision in the Legal Practitioners Act 1981 (SA) recognises the skills and training of sales representatives to allow this work.

19 The term ‘commercial’ can have different interpretations and is not being used to describe this type of property agency work. For example, in Queensland ‘commercial’ relates to debt collectors for which there is a separate licensing regime.

20NSW Office of Fair Trading 2008, Statutory review of the Property, Stock and Business Agents Act 2002, p. 68.

21Occupational Licensing National Law Act 2010 No. 66 of 2010 section 8 Law binds the State

(2) State means the Crown in right of this jurisdiction, and includes—

(a) the Government of this jurisdiction; and

(b) a Minister of the Crown in right of this jurisdiction; and

(c) a statutory corporation, or other entity, representing the Crown in right of this jurisdiction.

22 Australian Bureau of Statistics 2011, Australian System of National Accounts 2010–11, cat. no. 5204.0, ABS, Canberra.

23 This analysis is not suggesting that renewal fees themselves will be reduced on a per renewal basis, but that over a 10 year period the total amount paid in licence fees will be lower under a three-year licence term compared with a one-year term. This is because the licence holder is not incurring the application cost component of the fee as frequently.

24 PricewaterhouseCoopers 2009, Estimating financial impacts of the national occupational licensing system: final report, p. 24.

Based on estimates of the efficient processing component of licence fees from a survey of regulators undertaken in 2009 specific to licensing of property occupations. Estimate percentage based on licence processing cost as a proportion of fee revenue.

25 Based on the mapping exercise undertaken by the COAG National Licensing Taskforce, which identified the differences between state and territory licensing requirements and the requirements proposed under national licensing.

26 It is assumed that 30 minutes will be required for an applicant to obtain a passport photo and two written references (Government of Victoria 2005, Private Security Regulations 2005: Regulatory Impact Statement, Department of Justice, p. 29). In the absence of any other information, we have assumed that two-thirds of this cost is attributable to obtaining two written references (i.e. 20 minutes).

27 Based on the mapping exercise undertaken by the COAG National Licensing Taskforce, which identified the differences between state and territory licensing requirements and the requirements proposed under national licensing.

28The impact on the change in qualification for Western Australia will be included in the Decision RIS.

29 Australian Bureau of Statistics 2011, Australian System of National Accounts 2010–11, cat. no. 5204.0, ABS, Canberra.

30 PricewaterhouseCoopers 2009, National Occupational Licensing System: estimating financial impacts – final report.

31 Occupations assessed were building, electrical, plumbing and gas fitting, refrigeration and air-conditioning mechanics, land transport (both passenger and dangerous goods), property and maritime.

32NSW Office of Fair Trading 2008, Statutory review of the Property Stock and Business Agents Act 2002, ‘Attachment B – Year in Review Extracts’.

33Based on the total moneys claimed, 2004–05 to 2008–09.

34 The challenge for the analysis is that it is difficult to estimate the allocative efficiency impacts that may arise from changes to labour mobility. While the Monash Multi-region Forecasting Model can be used to estimate these impacts, this is a complex exercise that is beyond the scope of this study. Rather, the modelling draws on prior work undertaken by the Productivity Commission relating to allocative efficiency gains arising from mutual recognition – this is discussed in more detail in the cost–benefit analysis. The economy-wide gains in the commission’s modelling have been translated into an input into the current CGE modelling exercise. This input takes the form of a shock to labour efficiency and is prorated for the size of national occupational reforms for the property occupations (as was discussed in section 4.).

35 For example, the Industry Commission conducted a review of Hilmer Competition reforms in 1995 that estimated the growth and revenue implications of reform using a CGE modelling approach. See Industry Commission 1995, The growth and revenue Impacts of Hilmer and related reforms: report to the Council of Australian Governments.

36 Such as the modelling of various carbon tax and emissions trading scenarios conducted by the Commonwealth Treasury. The Monash model, which is used in this Consultation RIS, was also used to model the impacts of emissions trading for the Garnaut Review.

37 As conducted as part of the following commissioned research study: Productivity Commission 2010, Impacts and benefits of COAG reforms: reporting framework – research report, Canberra.

38 Office of Best Practice Regulation 2010, Best practice regulation handbook, Canberra.

39 National Occupational Licensing System 2010, Electrical occupations, Licence Policy Development Paper, Policy Element #1 – Licence Structure and Scope, Table 3b.

40 For example, households maximise utility subject to a budget constraint, while industries minimise costs subject to production functions.

41 For example, in assessing the impact of a policy change, dynamic general equilibrium models produce two alternative projections – the ‘base case’, that is, the growth path of the economy without the policy change; and the ‘policy run’, that is, the growth path of the economy in the policy change. The base case serves as the counterfactual or the control path from which deviations are measured when assessing the effects of the policy change. Creating a base case is a substantial undertaking, as the modeller is required to develop a view of what the economy may look like over the projection period and impose that on the model.

42 IBIS World 2012, Real estate agents in Australia, Industry Report, March.

43It is possible that this is not the case – that is, some hours saved could add to leisure time rather than increase productive hours of work. While an increase in leisure time would be expected to increase welfare, this would not be picked up in MMRF since it only considers market impacts.

44 The amount paid to government is based on the ABS 2005–06 input–output table. The total fee has been inflated to 2011 dollars as the cost saved under the cost–benefit analysis is in 2011 dollars

45 The amount consumed by each of the state and territory governments of public services is based on the ABS 2005–06 input–output tables and inflated to 2011 dollars. It has been assumed that government will consume less in administration services as a result of the reform (as informed by the cost–benefit results of a decrease in expenditure on licensing) but will also face additional costs associated with the licensing authority and the national licensing register.

46 Australian Government 2010, Best practice regulation handbook, Canberra, p. 66.

47 Ibid.

48 Tranche 1 includes the following occupational areas: electrical, plumbing and gasfitting, property, and refrigeration and air-conditioning.

49See this link on the ABS website.

50See this link on the ABS website.

51See this link on the ABS website.

52See this link on the VCEC website.

53March 2010 and December 2011 are the closest dates to May 2010 and March 2012 respectively.

54Productivity Commission 2008, Performance benchmarking of Australian business regulation: cost of business registrations (Cost of registering a real estate agency), pp. 147–151.

55The industry also includes conveyancers and valuers, which fall into the second tranche of national licensing occupations.

56 IBISWorld 2012, Industry Report L7720: Real estate agents in Australia, March 2012.

57 Ibid.

58 A provision in the Legal Practitioners Act (SA) 1981 recognises the skills and training of sales representatives to allow this work

59NSW Office of Fair Trading 2008, Statutory review of the Property Stock and Business Agents Act 2002, ‘Chapter 3: Market failure and the objectives of the legislation’.

60Ibid.

61Government of Victoria 2000, National Competition Policy Review of Victorian Legislation relating to the regulation of Estate Agents, Department of Justice, Melbourne.

62NSW Office of Fair Trading 2008b, Report: Statutory review of the Property Stock and Business Agents Act 2002, Department of Commerce, Sydney.

63Review of the Property Stock and Business Agents Act 2002, ‘Attachment B: Year in Review Extracts’.

64Ibid.

65Ibid.

66Consumer Affairs Victoria 2006, Final report of the Body Corporate Review – A review of effectiveness and efficiency of the Subdivision Act 1988 and Subdivision (Body Corporate) Regulations 2001 as they relate to the operation of bodies corporate.

67NSW Office of Fair Trading 2003, Regulatory Impact Statement: Property, Stock and Business Agents Regulation 2003.