Economic impact

1.34 Under s 24(2)(b) of its Act, the ALRC is required to have regard to the impact of its recommendations on ‘persons and businesses who would be affected by the recommendations (including the economic effect, for example)’.

1.35 The economic impact of the new National Classification Scheme may be understood at three levels:

  • likely impact on regulated industries;
  • likely impact on government revenue and expenditure;
  • likely overall impact on the Australian economy.

1.36 The likely economic impact on currently regulated media content industries is expected to be positive. Based upon the framework outlined in the Australian Government Best Practice Regulation Handbook,[19] the following can be identified as likely positive impacts for industry:

  • reduced mandatory requirements to submit content to the Classification Board and pay classification fees;
  • greater industry capacity to flexibly manage classification costs; and
  • fewer legal restrictions on the distribution of content.

1.37 In addition, the greater use of co-regulatory arrangements and industry-based classification of media content is likely to reduce the time and administrative costs or ‘paper burden’ on businesses.

1.38 It may be that some media content providers will choose to have in-house classifiers, while others will continue to have their content classified by the Classification Board. All industry classifiers will be required to be authorised by the Regulator, and industry participants will therefore need to consider training costs and economies of scale in determining who classifies their content. However, the possible use of authorised classification instruments and authorised classification systems would also be expected to reduce the unit cost of classification decisions.

1.39 A greater role for industry codes and co-regulation will allow government agencies more time to focus their efforts on the classification and restriction of media content where there are potentially greater community concerns

1.40 To deliver an effective classification scheme, the Regulator’s activities identified in this Report, including compliance and enforcement of classification laws under a co-regulatory regime, will need to be adequately funded. This is currently budget-funded through appropriations to various government agencies and departments involved in classification and media content regulation, including the AGD, the Australian Customs and Border Protection Service, DBCDE and the ACMA.

1.41 At the same time, a greater role for industry classification under the new National Classification Scheme will mean that government may receive less in classification fees. Decision-making by the Classification Board is currently fully cost-recovered through fees charged to applicants for classification. If only a narrow segment of industry is required to submit content to the Classification Board and pay fees set at a level to fully recover classification costs, it may be more equitable under a new scheme to recover from industry only part of the costs of making classification decisions.

1.42 Under the new scheme, it is also possible that more of the work of the Classification Board will involve classifying online media content submitted by the Regulator, in response to complaints or for the purpose of taking enforcement action. Many of these content providers are located outside of Australia and the content itself may not be legal to distribute in Australia. The cost of this work will usually not be recovered through fees charged to the content provider.

1.43 There may, therefore, be a need for more government funding of the Classification Board’s ongoing classification activities. It is arguable that a public interest case could be made for increased budget funding of classification decision-making. As argued in Chapter 7, it is in the public interest to have an independent body that sets benchmarks for classification decisions. It may also be in the public interest to require the Board to classify content before enforcement action is taken, particularly with respect to Prohibited content.

1.44 The likely overall economic impact of adopting the ALRC’s recommendations is hard to project. At a general level, it can be expected that a reduction in direct government regulation of media content classification, and greater application of industry codes and co-regulatory frameworks, will enhance dynamic efficiencies as part of what Deloitte Access Economics refer to as ‘a policy framework that supports investment and innovation in the internet economy’.[20]

[19] Australian Government, Best Practice Regulation Handbook (2010).

[20] Deloitte Access Economics, The Connected Continent: How the Internet Is Transforming the Australian Economy (2011), 46.