You are developing regulation with a likely cost of greater than $2 million. You are required to prepare a Regulatory Impact Statement (RIS), which includes an economic assessment.

A Regulatory Impact Statement (RIS) is a public document that outlines the problem that the proposed regulations are intended to address, various options that may address the identified problem and the costs and benefits of the proposed regulations.

What is the process for developing regulation?

Broadly, the process for developing regulation involves the following steps:

• Advise your Minister on the best approach, including whether a RIS is required.

  • Better Regulation Victoria can provide advice to help you to advise your Minister.

• You prepare for the development of the RIS, including detailed planning and consultation with your Legislation, Economic Assessment, Performance Evaluation, and Regulation Reform areas.

• You develop the RIS, including engaging with affected parties.

• The Commissioner for Better Regulation provides independent advice about the adequacy of the analysis in the RIS (rather than the merits of the proposal) against the requirements of the Subordinate Legislation Act 1994 (SLA) and the Victorian Guide to Regulation.

Most RISs go through three to four draft iterations. You need to allow ten business days for the Commissioner for Better Regulation to provide an assessment for each draft of a RIS.

It can take two to six months – or longer for complex, higher impact proposals – to draft a RIS and have it assessed by the Office of the Commissioner for Better Regulation as adequate.

The Commissioner for Better Regulation also provides guidance material, training and can advise on what kind of assessment is required.

If the likely cost of the regulation is at least $2 million, then a low-impact RIS should be prepared.

If the likely cost of the regulation is at least $8 million, then a high-impact RIS should be prepared.

High impact RISs have additional requirements on top of the minimum requirement (low-impact).

How should I undertake the economic assessment?

Guidance on undertaking economic assessment Guidance-on-how-to-undertake-economic-assessment-internet.DOCX (DOCX 127.36 KB) has been developed for staff to assist when performing, commissioning and evaluating economic assessments. Further guidance on specific processes, variables and methods is also available.

Cost-benefit analysis is recognised as leading practice economic assessment and is the recommended approach across the Victorian Government. In practice it may not be possible to undertake a cost-benefit analysis for all proposals and other methods may be used on an exceptions basis.

All economic assessments should be guided by the principle of proportionality, such that the investment in undertaking an economic assessment should be proportional to the scale and risk of the particular issue, initiative or investment.

An important part of any RIS process is the specification of the 'base case' or scenario against which the impacts of the proposed regulation are compared. The requirements for the base case are different depending on the type of proposal you are assessing:

• New regulations – where new regulatory proposals are being developed, it is appropriate to use a base case where there are no regulations in place.

• Amending regulations – where existing regulatory proposals are being amended, it is appropriate to use a base case where the existing regulations are in place.

• Sunsetting regulations – where regulations are sunsetting and are proposed to be renewed, it is appropriate to use a base case where there are no regulations in place.