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National Competition Policy: linking benefits with communities. Address to Agforce State Conference, 30 July 2001, Brisbane.



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National Competition Policy Linking benefits with communities

Doug McTaggart National Competition Council

Doug McTaggart, National Competition Council -- July 2001

Regional impacts of NCP

• PC Inquiry “Impact of Competition Policy Reforms on Rural and Regional Australia”, October 1999, concluded that in the long-run:

- only one in 57 regions estimated not to benefit from NCP in terms of output - all regions are estimated to benefit in terms of average income per person - majority of regions will either increase

employment or reduce it by an amount that can be absorbed in one year’s growth

Doug McTaggart, National Competition Council -- July 2001

Regional impacts of NCP - five of 57 regions would require five or more years of (relatively slow) growth to offset NCP job losses - ten of 57 regions which lost jobs over the

10 years to mid-1990s will lose more jobs as a result of NCP - reform inevitably creates winners & losers - these 15 regions comprise 30% of Australia’s land area but only 6% of national employment

Doug McTaggart, National Competition Council -- July 2001

Benefits from NCP

• In COAG 1995 report, IC estimated pro-competitive reforms would increase GDP by $23 billion -- 5.5% of GDP

• Some corroborating evidence since then:

- productivity growth 1% above previous trend for last 6 years consistent with IC projections

- productivity benefits passed on to consumers in form of lower prices

Doug McTaggart, National Competition Council -- July 2001

Benefits from NCP

- prices have fallen in many areas including electricity, gas, rails, ports, telephone, post - prices have risen in some areas including water - at this stage beneficiaries have more often

been larger metropolitan users - expected to flow through to all users over time - mixed results on service quality

Doug McTaggart, National Competition Council -- July 2001

Employment effects of NCP

• Early direct effects of job losses - concentrated in gas, electricity, rail, Telstra - distributed over both urban and regional areas - usually the result of reductions in

overmanning which had developed while government businesses enjoyed a monopoly • some job losses offset by increase in private sector jobs

Doug McTaggart, National Competition Council -- July 2001

NCP blamed for many problems • PC reported that NCP is widely perceived to be responsible for - withdrawal of government services

- demise of local businesses - closure of country bank branches - generally speaking, the major factor behind population decline in parts of country

Australia - a variety of social ills

Doug McTaggart, National Competition Council -- July 2001 But there are many other external

influences

• Downward trend in world prices for agricultural and mineral commodities

• Technological advances

• Changes in consumer attitudes and tastes

• Changes in lifestyle

• Other government policy changes

Doug McTaggart, National Competition Council -- July 2001

So why does NCP have such a bad name? • Too early for long-run results to flow through? • Early gains not evenly distributed?

• Adjustment issues not well handled?

• Blamed for outcomes of other external unrelated events?

• Is NCP well understood?

Doug McTaggart, National Competition Council -- July 2001

What NCP is not!

• Requirement for privatisation and asset sales

• Compulsory competitive tendering

• Contracting out

• Financial market deregulation

• Industrial reforms

• Cutting the public sector

• Reductions in welfare or social services

• Removing CSOs

Doug McTaggart, National Competition Council -- July 2001

What NCP is

• Extending competition into areas previously dominated by government monopolies - provision of infrastructure - legislative restrictions on competition

• Extending competition into areas of private sector previously exempt - for example, the professions

Doug McTaggart, National Competition Council -- July 2001

NCP Agreements

• Extend TPA to all businesses - previously most government and some private sector businesses exempt

• Introduction of competitive neutrality

• Review of all laws that restrict competition

• Reform of all laws that restrict competition only if the costs to the community of the restriction outweigh the benefits

Doug McTaggart, National Competition Council -- July 2001

NCP Agreements

• Development of a national access regime

• Specific regulatory reforms to the gas, electricity, water and road transport industries - begun earlier under auspices of COAG but now included in NCP

Doug McTaggart, National Competition Council -- July 2001 Not competition for competition’s

sake

• There is an assumption that competition provides best outcome • But competition seen as a means to an end:

- Community benefit • Three central reforms

• competitive neutrality • structural reform of public monopolies • legislation review and reform should be determined on a case by case

basis using the public benefits test

Doug McTaggart, National Competition Council -- July 2001 What is in the public benefit test? • All relevant factors

• For example:

- ecologically sustainable development - social welfare and equity - OHAS, industrial relations, access and equity

- economic and regional development - investment and employment growth - costs of change

Doug McTaggart, National Competition Council -- July 2001 What is in the public benefit test?

- consumer interests - competitiveness of Australian business - efficient allocation of resources • But, other factors may be relevant • The above list is not all-inclusive

Doug McTaggart, National Competition Council -- July 2001

Example: reviewing a SMA

• Factors likely to be considered:

- impacts of barriers to competition on farmers’ income - welfare of Australian consumers - value of Australian exports - environmental impacts - administrative and regulatory costs - socio-economic impacts on regional

ccommunities

Doug McTaggart, National Competition Council -- July 2001

Example: reviewing a SMA - employment effects - economies of scale in transporting and marketing - agricultural productivity - effects on value-adding industries

- anything else that is relevant - list is open-ended

Doug McTaggart, National Competition Council -- July 2001 Who conducts public benefit test? • Relevant jurisdiction

- Commonwealth, State, local government • Not National Competition Council • Challenging task for governments

- making judgements on importance of each factor - need for transparent analysis and reasons - properly constituted review process

Doug McTaggart, National Competition Council -- July 2001

Role of NCC

• Provides policy advisory and national oversight of NCP • Does not set reform agenda • Funded by Commonwealth but responsible to

all Australian governments • Four roles:

- assessment of Governments’ progress in implementing their agreed reform agenda

• recommendations as to level of competition payments

Doug McTaggart, National Competition Council -- July 2001

Role of NCC

- Advice on design and coverage of National Access regime - Community education and communication of specific reform implementation matters

and NCP generally - Specific projects as requested by a majority of Australian Governments

Doug McTaggart, National Competition Council -- July 2001

National Competition Policy • A reform package initiated by and overseen by all Australian governments (COAG)

• Competition reforms to be in community’s interest, judged by rigorous application of public benefit test

• NCC’s role is in assessment of governments’ progress against their own agenda

National Competition Policy Linking benefits with communities

Doug McTaggart National Competition Council