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Monday, 26 June 1995
Page: 1780

Senator TIERNEY (6.50 p.m.) —I rise to add my support to the coalition on this bill that is now before the Senate. The Competition Policy Reform Bill 1995 is a very vital piece of legislation for Australia. The national competition reforms can lower business costs, promote new investments and create new jobs. Senator Woodley outlined what I think are largely some of the possible downsides without really coming to grips with the benefits of this reform. Senator Woodley, as is the case in many areas of economic and social policy, it is a matter of managing new reforms in such a way that the downsides are reduced but of gaining the enormous benefits that come from greater economic competition within our national economy.

  There is one major downside that I worry about considerably in terms of the government's commitment to this. It is part of an economic reform agenda that this government says it is trying to implement, but I think it is a great pity—and I would like to make this point at the start—that, even though there has been reform in fair measure through our economy by the private sector right through the 1980s and 1990s and in some areas of the public service, the great stumbling block in this economy still is labour market reform, and this government still refuses to implement proper and meaningful labour market reform. We still have a Clayton's version of this. I will put that to one side at the moment.

  The Hilmer reforms that have sparked this bill really do address a real need in our economy; that is, the reform of the public sector enterprises to make them far more competitive. This is very welcome because Australia is still not fully modernised to compete in the world economy. Up until now, only part of the economy has been subjected to proper competition. Since 1974, the corporate sector has had to live with the competitive environment that the Trade Practices Act has created for it. It is welcome that this is now extended, in the way indicated by the Hilmer reforms, to essential services that are provided by the government. To put this into perspective, 10 per cent of GDP of this country is involved in the business and commercial enterprises of government. Therefore, it is absolutely essential that that become part of a competitive framework in Australia.

  The bill is an example of cooperative federalism at work. As people would be aware—and I need not remind senators—most government enterprises in this country are state based, and a federal bill of this nature is not going to work without the cooperation of the states. A majority of the states which have coalition governments have agreed to work with this ALP government to adopt these competition policies. At the federal level of government, the bill establishes two new bodies to oversee the implementation of reforms: the Australian Competition and Consumer Commission, which is the administrative and enforcement bureau; and the National Competition Council, which is the policy advice bureau.

  The states and territories will have performance indicators measuring efficiency and competition that have to be met in such utility areas as gas, electricity, water, and road transport over the coming years. If these indicators are met, as judged by the National Competition Council, the states will benefit from additional federal income. It is important to underline the potential benefits of this increased competition to the government sector.

  The attention of the community should really be drawn to the dollar gains for the Australian economy if we increase efficiency based on this sort of competition. The Industry Commission report of March 1995 places in perspective the benefits that will flow from the Hilmer and associated reforms. It is estimated that all reforms will add 5.5 per cent to Australia's GDP. With the present value of GDP at $470 billion, we are talking about the equivalent of $23 billion of additional national wealth. As I have indicated, the onus is on the states to perform and reform under this cooperative legislation.

  Importantly, the Industry Commission estimated that the consumers will reap $9 billion of benefit, or $1,500 per household, from these competitive reforms. The Industry Commission report puts the importance of the states' contribution to reform in context. The Commonwealth will contribute about $4 billion of the overall $23 billion of GDP increases; the state business reforms will contribute $19 billion of the $23 billion. Professor Hilmer nailed down the pivotal role of the states in achieving this growth in revenue and benefits when he said:

This national competition policy is not just an agreement to be signed; it is a raft of difficult reforms to be implemented over many years.

The carrot for the states to act is the promise of receiving additional Commonwealth moneys—indeed, the Industry Commission speaks of an additional $3 billion in extra revenue to be shared by the states if this entire reform program is activated.

  It is very necessary—it is essential—that we do this, because most of the government monopolies have evolved over a very long period of time and, having been totally sheltered from competition, have grown inefficient in the ways in which they operate and do not, like many businesses, search for new markets. An example of this is best illustrated by the electricity generation industry in this country. I would like to use the example of my own state of New South Wales, which has undertaken a considerable number of reforms over recent years and has become more efficient, but is missing the essential efficiencies that will come to electricity distribution in this country if we link the systems across the country.

  It is amazing, given the 45 years we have had a power system in this country which has high tension transmission, that all these transmissions stay in their own states—they do not link to states nearby. This is incredibly inefficient. I will explain the basic problem. When you build an isolated power system for one state, you need to add about one-third of the capacity to allow for breakdowns and for peak loads. If you link the electricity systems of Queensland, New South Wales, Victoria and South Australia, you can move loads across the system when a breakdown occurs and when peak loads vary, so you do not have to build as many power stations.

  In the early 1980s, that sort of facility was not available to New South Wales. Neville Wran woke up one morning, turned on the shower and had a cold shower because the whole system had reached overcapacity. That cold shower has cost New South Wales billions of dollars, because he embarked on a major expansion of the power generation system in New South Wales. We have now reached the situation where we have surplus capacity and cannot use all the electricity that we produce. If we were linked properly into Victoria and Queensland, we could on-sell our cheaper power and this would cut our costs.

  On the other side of that equation, going back to the early 1980s, if we had been linked in at that point to the other grid systems, Neville Wran would not have had to build so many power stations. The effect of that would have been to keep the price of electricity in New South Wales lower than it is at this point.

  This is all in the past and we must learn the lessons of that. It is heartening that there are some moves to create those links now. It is also heartening to see our new Labor government in New South Wales cooperating in some of this reform agenda. Unfortunately, the signals are very mixed at this stage. On the one hand, Premier Carr has referred to the calling of tenders for the provision of certain services to see if outside contractors can provide them more cheaply but without the loss of quality and availability. That is welcomed but I would remind the Senate that he is building on the achievements of the Greiner and Fahey coalition governments in doing that.

  It is somewhat ironic that Premier Carr, when in opposition, castigated these valuable reforms, trying to frighten the public of New South Wales at that time. Now that he is supporting them, he stands guilty of political opportunism in taking up public service job cuts, price rises and loss of public revenue. He knew he was misleading the people of New South Wales; now he embraces this sort of competitive reform.

  Or does he? The New South Wales Left in the Carr cabinet is showing signs of spoking the reforms he is proposing in New South Wales. New South Wales is already dropping behind Queensland on reform of transport costs to industry. Queensland has elected to go further than New South Wales with reform of transport infrastructure and this difference in the pace of reform gives Queensland coal producers a bigger advantage over the New South Wales producers.

  New South Wales companies will not get access to the reform benefits unless the Carr government enthusiastically supports competitive reform in this area. Coal companies in the New South Wales Hunter Valley and mines in the north-west of New South Wales—places like Boggabri, Gunnedah and Ulan—will be the big losers. In Australia, we are already at a severe disadvantage in our competition with other countries on freight rates. Our freights are something like $7 a tonne. We have to reduce this by about $3 to be world competitive in the coal industry.

  The Carr government will kill competition in this industry in New South Wales if it fails to keep pace with the Queensland reforms. The Hunter Valley rail project is waiting to invest millions in improved infrastructure but will reconsider its options as things stand under this new state Labor government.

  Overall, however, the coalition applauds the reforms indicated in this bill but, as usual, the rhetoric of the Keating government is not exactly being matched by action. The ALP is the captive of the ACTU leadership and these reforms do not cover the labour market. Our export processed goods—such as meat, wool, sugar and specialist manufactured items—are all exposed to competition on prices in world markets. But under the ALP, the labour market is totally insulated from the realities of world competition. In some of the processing industries our labour cost components are twice those of our competitors. Also, this government has substantially weakened the secondary boycott provisions in the Trade Practices Act, which means that big and small businesses are constantly exposed to potential unfair union threats and actions.

  There is a similar pattern of inaction in reform in a number of other federal areas which, if the reforms were implemented, would greatly complement what is proposed in this competition policy bill. I will mention just a few. In aviation policy, the government's commitment to reform fell over at the first hurdle when it reneged on the trans-Tasman integration agreement. Competition and reform in our ports is another area where this government has had a dismal record.

  When I came into this chamber the big issue of the day was whether the then transport minister—now Minister for Primary Industries and Energy—Bob Collins, would resign if he had not reformed the waterfront in 12 months. We all heard him boast of his proud record in this area, but by late 1994 the port of Sydney ranked 31 out of 44 in the world productivity stakes. That represented a deterioration, and we are getting worse, not better, in the area of waterfront reform.

  Another area where reforms have not proceeded is that of cultural policy. A report by the Prices Surveillance Authority two years ago recommended the Keating government deliver world competitive prices for compact discs to Australian consumers. All of us who are great consumers of compact discs would look forward to that reform quite eagerly if it dropped prices. But the Minister for Communications and the Arts, Mr Lee, as he does on many things, backed away from that decision to offer greater efficiency and lower prices to Australian music lovers.

  So we come to another reform agenda of this government and, given the record I have just outlined, we approach it with some trepidation. Over the years, the government's rhetoric on reform—economic reform, in particular—has sounded terrific but, if you look at the real world, it has not delivered in the areas I have indicated. We live in hope that the Competition Policy Reform Bill could be an exception. Let us hope so because I believe that it will be one of the most significant reforms of the economy ever undertaken—the actual opportunity to take an inefficient monopolistic structure and move it into a fully competitive environment.

  The COAG meeting has signed off on this and it has received support across all governments. The national competition regime must operate in all sectors of the economy. The referral of this bill to the Senate Economics Legislation Committee was an important exercise because it brought out some of the problems that are likely to be encountered with this sort of legislation. We recall how it all went through so quickly with COAG in the end, leaving us with some reservations about whether it would cover all the downsides that have been indicated, some of them by Senator Woodley.

  With that Senate inquiry, small business groups and local government groups expressed particular concerns about some of the downsides of this legislation. Small business concerns about the concentration of market power in the hands of fewer people are legitimate, and I have raised such matters in the Senate on a number of occasions in recent times, and continuing concerns, under the reforms proposed by this bill, must be monitored.

  Further, the view that relaxation of some regulations could lead to the lowering of standards of service is also a legitimate concern. The reform process is very complex and we must be on the lookout for possible anomalies and problems thrown up unexpectedly by this process of competition reform because, with the best will in the world and with the best structures, it is not always possible for governments to see ahead to some of the intricacies of the effects of this sort of legislation.

  The measure has had a very long gestation period. I welcome the birth of the national competition reform embodied in this bill. I look forward to its full implementation under the leadership of John Howard in the next coalition government.