Competition policy reforms in australia
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Competition policy reforms in Australia. 18 February 2014 Matt Crooke, Minister-Counsellor (Economic) Australian High Commission, New Delhi. Overview. National Competition Policy origins key components securing and maintaining support o utcomes and lessons for India

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Competition policy reforms in Australia

18 February 2014

Matt Crooke, Minister-Counsellor (Economic)

Australian High Commission, New Delhi


Overview

  • National Competition Policy

    • origins

    • key components

    • securing and maintaining support

    • outcomes and lessons for India

  • Australia’s ‘Root and branch review’ of competition


Background

  • Federation with three levels of government

  • Two types of government agencies at the Commonwealth level

    • Government departments and independent agencies


History to NCP – 70s and 80s

  • Trade Practices Act introduced in 1974

  • Australian economy was heavily regulated:

    • Fixed exchange rate/regulated financial sector

    • Trade barriers/tariff protected industries

    • Government ownership of utilities

    • Substantial price, product and wage regulation

  • In the early 1980s, large scale reforms removed many of these restrictions

    • Created pressure on many industries to adapt


History to NCP – 90s

  • By the early 1990s, Australia recognised a need for further microeconomic reform.

  • Australia’s international competitiveness was lagging, and many sectors were highly inefficient; this was patently due to weak market forces at home.

  • In 1992, an independent inquiry into the matter was launched – known as the Hilmer Inquiry.


History to NCP – 90s cont.

  • The Hilmer Report recommended sweeping changes to Australia’s competition framework.

    • Acting on the Report, Australia’s Federal and state governments agreed to the National Competition Policy Reform package in 1995.

  • The overarching vision was to create national markets.

  • This has further evolved into a guiding vision of creating a ‘seamless national economy’.


National Competition Policy

  • Agreed by all levels of government in 1995

  • Reforms include:

    • Review of legislation that restricts competition

    • Universal application of pro-competitive legislation, particularly the TPA

    • Reforms of public monopolies (transport, electricity, gas and water)

    • Implementation of competitive neutrality to government businesses

    • Third party access to significant infrastructure


Legislation review

  • Guiding Principle:

    • Legislation should not restrict competition unless it can be demonstrated that:

      • the benefits of the restriction to the community as a whole outweigh the costs; and

      • the objectives of the legislation can only be achieved by restricting competition.


Reforms to public monopolies

  • Key principles for restructuring public monopolies include:

    • Separation of regulatory and commercial functions;

    • Separation of natural monopoly and potentially competitive activities; and

    • Separation of potentially competitive activities into a number of smaller, independent business units

    • In addition, assets were privatised where government ownership was no longer justified.


Reforms to public monopolies – competitive neutrality

  • A distinguishing feature of Australia’s reforms to public monopolies is the inclusion of competitive neutrality.

    • The Hilmer Review recommended that all levels of government agree that government businesses should not enjoy any net competitive advantage by virtue of their public ownership.


Third-Party Access Regimes

  • The point of Third-Party Access Regulation is to promote the economically efficient operation of, use of, and investment in infrastructure facilities with natural monopoly characteristics.

  • This can help to promote effective competition in upstream and downstream markets.

    • It is often economically inefficient to duplicate such infrastructure.

    • ‘Standard’ market power provisions were seen as insufficient to deal with natural monopolies.


Implementing the NCP

  • National Competition Council undertook implementation assessments

  • Competition payments were made to the States based on those assessments


Securing support

  • National Competition Policy agreement was a significant achievement

  • Initial support achieved by drawing on evidence of potential gains


Maintaining Support

  • Challenges of misinformation and vested interests

    • Seek to overcome by transparency and assistance on case-by-case basis.

  • Broad nature of program

    • Those who lose from one reform, gain from another

  • Public interest

    • Any reform is in the community’s interest


Public interest test

  • Environmental considerations

  • Social welfare and equity considerations

  • Occupational health and safety

  • Economic and regional development

  • Interests of consumers

  • Competitiveness of Australian businesses

  • Efficient allocation of resources


Outcomes of NCP

  • 2005 Productivity Commission Review of National Competition Policy

    • Significant net economic benefit of the reforms

  • Lessons from NCP inform current and future competition and deregulation reform agenda.

  • Principles from NCP manifest in current policies, including current productivity-enhancing reforms.


Competition Policy Review

  • The Government’s root and branch review of competition laws and policy will commence in early 2014.

  • The review is intended to identify long-term improvements that can be made to the regulatory and policy framework to improve the productivity of the Australian economy.


Possible lessons

  • Continue to build the case and be ready for opportunities – well-devised microeconomic reform improves peoples lives for the better

  • Independent, vibrant public institutions that support reform and are as sector-neutral as possible – towards a vision of well-functioning national markets

  • Allow forward-leaning jurisdictions to drive process and consider fiscal incentives in support of national reform outcomes


Competition policy reforms in Australia

18 February 2014

Matt Crooke, Minister-Counsellor (Economic)

Australian High Commission, New Delhi


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