2000 words (18 minutes reading time) by Lancing Farrell

I might be drawing a long bow, but I think the Abundance agenda presents a fundamental challenge for those councils trying to find a way forward that is financially sustainable in a rate capped environment. It opens the door to reviewing regulatory and other service design to make savings and support economic growth.

Let me start at the beginning.

On 19 June 2025, in an article about a speech by Jim Chalmers, the Australian Treasurer, he was quoted as saying that left-leaning governments (as we currently have in Australia) are “strangling their own good intentions with bureaucracy”. He is asking regulators across the nation to identify regulations that can be axed or simplified to reduce compliance costs and increase the pace of economic growth. It is part of delivering a supply-side solution to the nation’s housing and energy problems by removing government-imposed impediments to production of goods and services.

Chalmers cites the book ‘Abundance – How we build a better future’ by Ezra Klein and Derek Thompson as providing a wake-up call to the left in politics to re-think what he calls “their overly rules-based approach to making change”, which is getting in the way of progressive change. He wants measurable reductions in the ‘regulatory burden’ from red tape.

This is an interesting point in world history for a government to be calling for less bureaucracy. David Brooks, in a long and impassioned dissertation about recent changes in the conservative movement in American politics says that Americans are starting to understand the importance of institutions and arrangements that check the power of individuals. Government regulation is one of those arrangements. You could argue that the regulatory changes Chalmers wants are at the opposite end of the spectrum to those occurring in America, nonetheless, removing regulation is a paradigm shift for governments, especially those on the left of politics.

“Progress is not always a smooth or merry ride. For a few decades, nations live according to one paradigm. Then it stops working and gets destroyed”

David Brooks

Brooks maps the steps to recovery from a national crisis. The fourth of these steps is a national reassessment. This is exactly what is happening in Australia at the moment. Recently, Chalmers asked Australia a question – “Can we, as a people, make big reforms to make our country better, even if it’s hard? Or are we too selfish, too myopic, too complacent?”. The reforms Chalmers has in mind are not just to regulations and red tape, and include Australia’s tax system where changes that have been successfully resisted for decades by vested interests.

Brooks says nations that turn around develop a “clear-eyed view of what’s working and what is not, and they pursue careful and selective change”. He sees economic growth as the last of the recovery steps, as a ‘salve for many wounds’, and puts forward the Abundance agenda as the most promising way to achieve that growth in America. I decided to have a closer look at Abundance.

Derek Thompson, one of the authors of ‘Abundance’, says voters in America are angry about the status quo. They want change but the answer is not the wrecking ball. He says Americans are being fed the line that everything they don’t have requires the elimination of something they need. It is a scarcity paradigm. His solution involves “taking a page from the libertarian obsession with eliminating harmful regulations to make the most important markets work better”.

According to Thompson, abundance means deregulation to supply more housing where it is in demand. Revitalised science policy that prioritises discoveries that extend lives and improve health. Invention that brings forward technologies in transport, medicine and energy. He sees the impediments to abundance as special interests, powerful incumbents, and conservatives. The similarity with Chalmers’ agenda is clear.

“New legal norms and court decisions made it easier and more common for citizens to sue to block the state.”

Derek Thompson

Thompson says conservatives have spent decades trying to make government smaller, and special interest groups have spent those same decades making government weaker. He says if the Democrats (and presumably any party of the left) want to govern they must guarantee that the government can actually do what it says it will do.

Jonathon Chait describes the division over abundance in the left of American politics as a ‘civil war’, with one side saying it is the key to prosperity (moderates) and the other that it is just the infiltration of corporate interests (progressives). He describes abundance as a “new set of ideas” intended to make it easier to build housing and infrastructure and for government bureaucracy to work, with ‘win-win’ solutions.

“How could a government that once constructed miracles of engineering—the Hoover Dam, the Golden Gate Bridge—ahead of schedule and under budget now find itself incapable of executing routine functions? … And, more disturbing, why was everything slower, more expensive, and more dysfunctional in states and cities controlled by Democrats?”

Jonathon Chait

Chait says examination of the difficulties experienced by government led to an epiphany for the examiners – the government had tied itself in knots and prosperity could be unlocked simply by untying the knots. He also says that any swift government action usually involves suspending or ignoring standard procedures. Anyone who has been involved in an emergency has had the same experience – government works quickly and well when the usual rules don’t apply.

At this point you are probably wondering what all of this has to do with Australia or the Treasurer or councils. I admit I have travelled a winding path intended to paint a picture of governments struggling to find a way out of the status quo that their voters will support (especially those from the left); governments providing a clear direction forward (that addresses the right issues); and governments ensuring that they are capable of delivering on their commitments (overcoming vested interests and red tape).

As regular readers will know, this blog has been advocating for councils to adopt a new paradigm in response to the rate cap, and for councils to design better services that meet customer needs and expectations. Councils are both subject to regulation from higher levels of government and regulators themselves in their role as local agents of the State government and legislators of their local laws. The question on my mind has been – In a national push for deregulation, how can councils reduce the cost of compliance and increase productivity?

It seems that the answer is in re-thinking regulation. John Seddon has written a manifesto on the subject and given a speech that explains his thinking. Seddon’s focus is on public sector productivity. I would argue that if councils become more productive, their input into the local economy also improves productivity. For example, councils have been identified as key players in the regulation of housing supply in Australia.

Seddon’s views on how to improve regulation are based in his work in systems thinking and hinge on the links between purpose (why you do something), measures (did you do it) and method (what is the best way to do it using learning from measures). He sees two types of problems with current regulatory approaches in the UK. The first is that adherence to regulations prevents productivity improvements. The second is that productivity improvements are often in conflict with regulations. He says this is because regulation dictates measures and methods.

Instead, Seddon argues that politicians and regulators should set the purpose of a service in the customer or citizens terms. The methods and measures to achieve that purpose will then be the responsibility of the regulated to determine. He says this change in the locus of control will unleash innovation in responding to customers/citizens and achieving the purpose of the service.

In the current approach to regulation, the regulator specifies the performance required and high levels of compliance is judged to be ‘good’ performance. This is whether or not the service meets customer or citizen needs and expectations.

This approach not only constrains innovation and prevents productivity improvement, it presents a more fundamental problem by creating waste in service delivery systems. I was speaking to a graduate of the 12 Days to Deming course run by the Geelong Quality Council (available for free, believe it or not), and she pointed out that conformance with specifications is inherently wasteful.  I will explain.

Her thinking is based on the Taguchi Loss Function. Customers and citizens place value on a good or service. When that value is met perfectly it is the lowest cost for delivery of the good or service. This is represented by the ‘target’ value in the diagram below. Imagine that every unit of goods or services produced matches that point exactly for each customer or citizen – there would be no waste or loss. The loss in value progressively increases as variation increases from the ‘target’ value.

Taguchi saw the largest share of losses from not meeting customer needs or expectations as becoming apparent in the longer term and related to things like customer or citizen dissatisfaction and declining performance. To estimate them, he developed the quality loss function. Without going into the maths, I will explain the concept and how it can be used by management. The Taguchi loss function is shown diagramatically below.

Source

When the actual quality of a good or service (the green line) produced moves away from the target value, either towards the Traditional Lower Specification Limit or the Traditional Upper Specification Limit, the customer is not getting exactly what they need and expect and there is loss through waste. Loss is represented by the area under the green and black lines. At some point the specifications will say that the goods or services have passed a threshold value (the red lines) and must be rejected. This is a complete loss for a service, as it now has to be repeated.

The specification limits are the values that you cannot go below or above. In regulatory terms they are the standards that must be met. The progressive loss of value is shown by the green line. The blue line compares traditional thinking in regulations that say there is no loss until a specification limit is met, with Taguchi’s thinking that there is continual loss in progressive variation from the target value. The greatest waste comes when conformance with specification is absolute at a particular value, as shown in by the red lines.

Many regulated (and unregulated) council services have ‘goal posts’ that match the red lines. Passing between the goal posts at any point achieves the same score. Waste and loss is built into the service through this standardisation. The role of management is to make the actual service delivery, the curves shown by the green lines, as steep as possible to minimise losses. Waste and loss is built into the service through targets that set ‘goal posts’ and service standardisation. Lets have a look at an example.

The design of the planning permit service is based on making decisions within 60 days. It is an example of a traditional service design. Once a permit application ages more than 60 days it is a fail and it doesn’t matter when it is determined as far as the regulators are concerned. The lower specification limit is 1 day and the upper limit is 60 days. Planning offices try to clear as many permits as they can at the end of each month to boost their reported 60 day approval results. They also try to ‘stop the clock’ on permits whenever they can by finding reasons to refer the application outside the council or ask the applicant to update information or provide additional information.

Each planner has multiple permits to assess (typically between 30 and 50 per planner) and they take every opportunity to stop the clock. They work on each application until they get stopped by one of the reasons listed above and then they move on to the next application. This ‘job surfing’ and clock stopping increases the total elapsed time for a decision on the permit, even if the time that counts towards the 60 days is on target.

An alternative that has been proven to work is allocating each permit to a planner and asking the planner to contact the applicant to understand why they have applied for a permit and what matters to them about how the application is assessed. This gives a clear idea of what the point representing customer or target value looks like. Unsurprisingly, not every applicant wants a permit issued in 60 days. Some want it immediately (or yesterday!), but many simply want a date within a reasonable timeframe that they can plan around. Some have a future date well beyond 60 days in mind. Others don’t have any date in mind because they have made the application themselves (i.e. they haven’t used a consultant) and they want their hands held by the council as they go through the assessment process.

Once the planner knows why the application has been made and what is important to the applicant, they can do their best to deliver that outcome. This gets them close to the target value and can reduce total elapsed time by 60%, planner time by 50% and cost by 25%. The reduction in holding costs for developers is also significant. These savings are the waste and loss built into the current system.

I think councils need to carefully consider the Treasurer’s request. Taking a wrecking ball to regulations and removing them or diminishing them so that they have little or no effect, is not in the interests of the community. We have seen that happening. A clear-eyed assessment of how regulation is working, and the impact on productivity of the design of council services, would go a long way towards reducing costs and creating economic growth.

Note – the podcast was made using Notebooklm.