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Thursday, 22 June 1995
Page: 1694

Senator GIBSON (12.49 p.m.) —I rise on behalf of the coalition to speak about the Competition Policy Reform Bill 1995. The coalition supports this important bill and we welcome the moves to increase competition in the economy.

  The Trade Practices Act has applied to the corporate sector of the economy—which is most of it—for over 20 years since 1974. The essence of this bill is to extend the Trade Practices Act to reach the government sector and the unincorporated enterprises within the economy. With the government sector—the government businesses, the government commercial enterprises—we are talking about something like 10 per cent of our GDP. So it is a very important sector and a very important provider of essential services. We want competition within that sector so that it is more efficient and so that businesses can get on with being more efficient and world competitive.

  The proposed framework allows competition within these sectors and the onus goes back on government, particularly the state governments, to adopt competition policies. We are talking about a new procedure—an access regime—whereby people will be able to access the essential monopolies, such as electricity for the transmission grid, gas pipelines, rail lines and ports. There are two arms in relation to this bill: the administrative and enforcement arm, which is the Australian Competition and Consumer Commission; and the policy and advice arm, which is the National Competition Council.

  This bill comes to us because, at long last, there has been agreement between the Commonwealth and the states, with each of the states agreeing to implement competition in their respective areas. There will be hurdles for the states with respect to performance on electricity, gas, water and road transport over the ensuing years. If the states clear those hurdles, as will be judged by the NCC, they will qualify for additional income from the Commonwealth.

  Why is this competition important? It is extremely important because it offers the prospect of increased efficiency within the economy. I commend to senators and to the public the Industry Commission's report of March of this year on the growth and revenue implications of the Hilmer and associated reforms. It estimates that implementing all those reforms will add 5.5 per cent to GDP. Since GDP is presently around $470 billion, that increase is equivalent to around $23 billion. For consumers, that will mean an additional $9 billion, the equivalent of about $1,500 per household, if these reforms are implemented.

  The reforms by the Commonwealth will contribute about $4 billion out of the $23 billion, with the Commonwealth getting increased revenue of about $6 billion. If the states carry out all the reforms, they will contribute about $19 billion to the $23 billion and will have increased revenues of about $3 billion.

  I would like to share my experience in one of those monopoly areas—the electricity industry. When I was in the commercial world I had experience as a major electricity buyer for Australian Newsprint Mills. I was the leader of a team which built a newsprint mill at Albury in New South Wales about 15 years ago. We spent $200 million at that time establishing a world-class, internationally competitive pulp and paper mill. But we were very dependent upon electricity.

  Within 12 months of building the mill and getting it going, the Wran government doubled the price of electricity to the mill, making it uneconomic. The mill would never have been built if the directors had known that the New South Wales government was going to do that. If there had been a national grid at that time and if we had been able to negotiate with a different supplier, that particular mill would have been profitable from the end of its first year. Instead, it had major losses for several years.

  I suggest that, had it not had to meet that price rise, the mill would have doubled in size by now, attracting, in current day costs, an additional $500 million in investment. Australia would be importing much less newsprint and would probably be exporting some of similar grades. But that has not happened because a state government doubled the price of electricity to an industry without due warning. That disastrous experience is a good example of how to frighten off investors.

  On the other side of the coin, before coming here I was chairman of the Hydro-Electric Commission, an electricity supplier, for four years. It was obvious that a national grid was coming and we went through a major program of reform in the face of eventual competition. We spent a lot of time and effort on improving productivity. I am proud to say that that organisation has doubled its labour productivity over the last several years through contracting out and outsourcing goods and services rather than having everyone employed within the one organisation. Sadly, I refer to an article in last Monday's Hobart Mercury, which reports that Labor's state opposition energy spokesman, Dr Amos, has criticised the HEC for engaging so many consultants. According to the article:

Dr Amos said an organisation should be able to manage its own affairs.

  "If an organisation cannot manage its own affairs, then it is an organisation that is out of control," he said.

What absolute nonsense! The whole point is that organisations cannot have experts in everything involved within the organisation. They need to contract out and buy in external services. That is part of being efficient.

  The Hilmer reform puts the onus back on the states to perform but they get rewards for doing so. If they clear the hurdles, they get additional income from the Commonwealth. So it is up to them. The states can exclude some entities from competition if they wish to, but of course the community will not get the overall benefits if that is done.

  Also in my home state of Tasmania, as reported in the Mercury of last week, there has been some criticism from the Public Sector Union, warning that competition may not be good for Tasmania. It suggests that we could see price rises, service cuts, loss of public revenue and great dangers for consumers. Again, what absolute nonsense!

  We must have more efficient public sector businesses so that the whole of the economy is facing up to being internationally competitive. There is no question about that. My own state has to face up to that and I know that the Tasmanian government is facing up to it. On the same theme, Hilmer said that national competition policy is not an agreement to be signed; it is a raft of difficult reforms to be implemented over many years.

Senator Kernot —To whose benefit?

Senator GIBSON —To the consumers benefit. Read the Industry Commission's report. I might also add that New South Wales is quite well prepared for this. Last week, the Premier, Mr Carr, made reference to the fact that the general government sector—government departments and agencies—would be required to engage in contracting reviews and market testing. That is, it will be calling tenders for the provision of particular services to see if outside contractors can provide them more cheaply but without loss of quality. We applaud that move. All state governments are doing this. I know that in my state of Tasmania the government has made enormous gains in efficiency and competitiveness.

  As I said before, the coalition welcomes these reforms but we have problems with the lack of action exhibited by the federal government. The reforms do not cover the labour market. For example, the National Farmers Federation gave evidence before a Senate committee on 5 May about the meat industry and said that, while the product markets for that industry are exposed to world markets, the labour market is not and, as a consequence, the cost of processing meat in Australia is double that of other world processors.

  The government backed away from secondary boycotts and shifted them from the Trade Practices Act to the Industrial Relations Act and substantially weakened the concept. It is a real threat to small business and big business. We have an example in aviation where the government backed down on the trans-Tasman integration. The government failed to meet the agreement it had entered into.

  We have the example of the waterfront where a lot of money has been spent, but with what result? There has not been much improvement in efficiency. Contship Containerliners measures wharf productivity at about 40 world ports based on the experiences of its own ships. In the first half of 1993 Sydney ranked 31 out of 40 and Melbourne ranked 20. By late 1994, Sydney ranked 31 out of 44 and Melbourne ranked 39. That is a serious deterioration. We have other figures in a similar vein.

  The Commonwealth government has backed away from shipping. It has done nothing about the trans-Tasman accord which was an agreement tied up by Australian and New Zealand unions to remove competition. The government has refused to allow international ships to trade on the Australian coastline. The government has retained part 10 of the Trade Practices Act for outward cargo liner shipping services operated by an international cartel—called a conference in the trade. This was against advice that the government received from the Hilmer committee, the Trade Practices Commission, the Prices Surveillance Authority, the Treasury and the Industry Commission. We also have the example of the government ducking issues concerning ANL.

  Recently we had the Commonwealth government ducking issues with regard to compact disks. The Australian community was promised efficiency and world prices for compact disks, but when it came to the crunch the government backed away.

  What has the government done to help business and investment in Australia? The government has added substantial taxes to the business sector. While the government talks competition, it is headed in the reverse direction on things which are within its own control. Since Prime Minister Keating came into power the total revenue of this government will rise from $100 billion in 1993-94 to an expected $124 billion next year. That is a huge increase in revenue. It is an example of a high taxing, high spending government.

  The opposition welcomes the Competition Policy Reform Bill 1995. We are pleased to see competition being brought in for an additional substantial sector of the Australian economy. The emphasis now moves back to the states. The coalition is delighted that the state premiers have signed off and have agreed to implement these difficult reforms.