The Productivity Commission will hold an inquiry into barriers to setting up and closing businesses.

Treasurer Joe Hockey says such hurdles can hinder the efficient operation of markets.

They can be the result of market structure, government regulation, industry-specific costs or geography, according to the inquiry’s terms of reference.

The commission will examine the nature, scale and extent of barriers, and identify options for reducing them.

It will release an issues paper this month. The first round of submissions is due on February 20 and a draft report is scheduled for May.