The increasing regulatory burden in Australia is threatening to stifle innovation and Federal and State Governments should act to ease the problem, according to the CEO of PricewaterhouseCoopers.

Tony Harrington said recently that compliance-related activity was diverting experienced talent away from contributing to business growth.

“Excessive regulation is exacerbating the shortage of experienced professionals, draining scarce talent away from potentially more productive areas of business activity, driving up costs ultimately borne by shareholders and consumers, and threatening to reduce overall Australian market competitiveness,”Harrington said.

He also railed against “excessively detailed, rules-based approaches” to governance and reporting.

“CLERP9 was directionally right,” Harrington said. “But we’ve always got to focus on ensuring that we don’t take the implementation too far down the black-letter path. At a time when businesses are undergoing massive change in response to the CLERP9 and IFRS measures, they are being forced to deal with a proliferation of other industry-specific regulatory requirements and impositions from all levels of government.”

Harrington joins a growing list of high-profile CEOs and business figures that have railed against excessive regulation. Commonwealth Bank of Australia CEO David Murray said last year that the amount of regulation his bank faced was diverting resources away from core business, and others have also let it be known they are not happy with the regulatory onslaught.

However, others have been broadly supportive of the changes and Australian Prudential Regulation Authority chairman John Laker said he did not hear well-run institutions complaining about regulation.

For PwC, increasing regulation is something of a double-edged sword. On one hand, the firm may have benefited from the regulation through increased client work, but some regulations – notably the US Sarbanes-Oxley Act – have forced large accounting firms to reorganise their businesses in the face of potential conflicts of interest.

Harrington singled out several regulatory developments failing to meet policy objectives while imposing onerous operational burdens, including the myriad regulatory changes to virtually all aspects of the banking and financial services sectors, regulatory changes affecting directors’ duties from legislation in differing jurisdictions, and the varying national and international implications and applications of anti-money-laundering requirements.

“Instead of enhancing Australia’s reputation as a ‘smart nation’, focused on innovation and other performance-enhancing opportunities, this ever-increasing volume of governance obligations could stagnate our business culture,” Harrington said.