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Thursday, 22 June 1995
Page: 1697


Senator KERNOT (Leader of the Australian Democrats) (1.03 p.m.) —Here we go again, embracing another theory. Despite all the evidence of the last decade, here we go again. Unquestionably competition is always good—


Senator Panizza —Of course it is.


Senator KERNOT —I will go on to talk about that in my speech. I might refer to Compass Airlines. I will come back to aviation later. Through you, Mr Acting Deputy President, I say to Senator Panizza: you cannot always embrace theories unilaterally or universally without thinking about their impact on ordinary people. You must ask the question: who pays the cost of change? That is the point I want to make in this speech.

  The Competition Policy Reform Bill 1995 will help set in train one of the most radical and far-reaching public reforms. The public sector as we know it will be forced to restructure in far-reaching and not necessarily positive ways. This bill will force public service agencies to reassess their role, their relationship to the public, and to realign their operations. I do not object to any of that. However, the focus is to do all of this on largely economic commercially driven lines. As I said, nobody objects to the notion of an efficient public sector, but the question is who pays for it.

  In the Democrat's view, competition policy represents the victory of economics over equity, of competition over compassion and of accounting over accountability in the management of public services. Yet this bill, and the ramifications of this bill, have been the subject of very little public debate. It has been the subject of minimal public scrutiny. It has been debated in closed forums—not by Australian people who own this debate and the outcome of it.

  While the Industry Commission has debated it, while cabinet has debated it, and while COAG has debated it, everywhere I go Australian people are catching up with the fact that it exists. In my view, this bill highlights that parliament has been largely sidelined by the Keating government as the forum for policy debate.

  The deal with the states on competition policy is already signed and sealed, and all this bill does is make sure it is delivered. The merits of the argument as to whether the Hilmer path, as opposed to any other path, is the best path or the only path have not been adequately aired. It is simply assumed. The majority of the media in this country has already accepted the Hilmer philosophy as gospel without any challenge to the likely effects or the fundamentally doctrinaire belief underpinning it that all competition is good and all regulation is bad—just like Animal Farm.

  The Democrats foreshadow that we will be doing all we can to raise the profile of the competition policy debate because the potential of this bill in terms of restructuring the public sector, and the role the public sector has in supporting and holding together our society, cannot just be discounted. As we always say, the devil is in the detail and it will be in the detail of the implementation. We want to closely monitor the way that the states put this package into effect.

  We will need to make sure that higher user charges, the end of cross-subsidisation, the narrowing of community service obligations and the inevitable path to privatisation paved by this package do not lead to fewer public services to those who need them most—the low income earners and, especially, regional Australians. Competition policy has great potential for banditry and bastardy. We want to make sure that we keep the bandits and the bastards as honest as possible.

  The bill has six major components. It sets up an Australian Competition and Consumer Commission by merging the Trade Practices Commission and the Prices Surveillance Authority. It sets up a National Competition Council to oversee the general performance of governments in promoting competition policy reform. For the Commonwealth sector it establishes provisions for the declaration of certain infrastructure services to be available for access by the private sector to compete against the public sector provider.   It modifies existing provisions in the Trade Practices Act on competitive conduct, including allowing the authorisation of price fixing for goods and for resale price maintenance, the repeal of price discrimination, the extension of the act to cover services as well as goods, the application of notification to third line forcing, and the removal of the shield of crown immunity for states and territories in running businesses.

  The bill facilitates the extension of the Trade Practices Act to individuals within state jurisdictions following agreement with the relevant states and territories. It abolishes prices surveillance, downgrading former powers of the PSA to price monitoring, and extends its power to state and territory businesses.

  It is predominantly because we do not believe that this bill has had enough public debate—and I do not mean parliamentary debate; I mean genuine Australian citizenry debate—that we are going to vote against it. We are not doing that because we believe everything in the bill is bad—of course there are some positive aspects to it—but because the competition policy reform agenda is based on a flawed premise and a duping of the Australian public.

  We are told that competition is good. Senator Gibson said that. The Hilmer report is laudatory of the untrammelled benefits of market and competition underpinning it. But we have heard that line for 12 years in this country since our first foray into deregulation. We were assured that deregulating financial markets would usher in a new competitive world of banking. It did, but for whom? For corporate customers who saw unlimited lines of credit open up before them. But for the hundreds of thousands of home borrowers and small businesses—


Senator Boswell —And farmers.


Senator KERNOT —Yes, Senator Boswell, I include them in that—competition has reduced rather than tightened, with real interest rates much higher now than they were a decade ago. These promises were made to us then. The evidence is in. Senator Panizza referred to aviation. What were we promised? We were promised lower prices. Compass went up, Compass came down and the aviation industry looks surprisingly similar now to what it did before, with largely identical airlines operating on largely identical routes on largely identical timetables.

  More recently, we were promised that partial deregulation of the labour market would usher in a new level of productivity and fairness. Some of the evidence on this is that the unions with industrial muscle are winning larger pay rises than ever before, while workers in less active markets—particularly women in white-collar employment—are actually watching their wages fall markedly in real terms. Let us compare the promises with the reality and see who gains and who loses. Prime Minister Keating is promising us another brave new world. He says that this brave new world is going to usher in a new era of benefits to consumers and governments and that this is going to happen because we are all going to share in ever increasing slices of some magic pudding style competition pie.

  In its usual first strike strategy—which is always to use the Industry Commission, because we cannot ever question what the Industry Commission says—the government produced an Industry Commission report to prove that competition is the best way to go. Hilmer has all the answers. However, this Industry Commission report was so unbelievable in some sections that even the authors of it in the commission felt necessary to qualify it by admitting, `Yes, there are a few strategic decisions in here. There are a few approxima

tions. There are a few omissions.' That is a very polite Public Service way of saying, `This is really a guess, but it fits the bill of what Prime Minister Keating wanted us to say.'

  But that did not stop basically every media house in this country reporting without question the alleged bonanza, the alleged benefits. It was like GATT—`Everybody stand back; there's going to be $4 billion worth of benefits from GATT. We can't tell you exactly where from, but believe us.' It is the same thing here. We are told that there is going to be a long run annual gain in real GDP of 5.5 per cent of $23 billion a year from Hilmer, a gain to consumers of $9 billion and a revenue gain of $9 billion for the Commonwealth and the states.

  It has since emerged that the Industry Commission, in its evangelical zeal, had grossly overstated the gains. Even the Business Council of Australia, the original sponsors of Hilmer, produced its own report from the University of Tasmania and suggested that the benefits really were about half the level of the Industry Commission report. But there is no problem in making ambit claims, is there, if they get reported first!

  Associate Professor John Quiggin of the ANU and James Cook University concluded that the Industry Commission report did not add up. It was identified that the Industry Commission had double counted a range of ongoing reforms, had overestimated the flow-on effects from the reforms to the general economy, had assumed reforms which go much further than the Hilmer report ever intended and had assumed no negative effects from the displacement of thousands of public sector workers whose job losses will provide the filling for the Hilmer magic pudding.

  Dr Quiggin concluded that there would still be a benefit from the Hilmer reforms, but a much more modest one: 0.5 per cent of GDP—one-tenth of that estimated by the Industry Commission. So then the question becomes: if the benefits are modest, is it worth pursuing? Is there a better way? Thank goodness for rigorous analysts like Associate Professor Quiggin.


Senator Boswell —Has it been in the press?


Senator KERNOT —Not much, no. I have not seen an official response to the Quiggin report. I do not expect to. The Industry Commission has done its job: it has delivered its first strike and it got its few weeks of good catchy headlines. But I want to talk about the other picture, the real picture—the picture that includes a long list of potential losers. I have said that there will be some winners. There will be some losers, too. The first losers are the thousands of public sector workers who stand to lose their jobs. The thousands who remain will be expected to provide a higher level of service to a larger population with fewer resources. It is not that people object to working harder: it is what resources they have to work with.

  Secondly, there are the consumers of services. These people will also lose. They are likely to get less and pay more for public sector services. The third group of losers will be in the education system, where schools could be forced to compete with each other, to accept commercial constraints, to contract out core services and to charge higher user-pay charges for parents—and all this without any consideration of the likely impact on educational standards. In a world based on competition, market forces are supposed to set quality, not the education system itself.

  The fourth group of losers is the environment and those who have concern for the environment. State-owned water, electricity, forestry and gas bodies across the country will seek to make a buck out of the resources, while the unprofitable conservation elements of their charters will wither on the community service obligation vine, because that comes out of the budget.

  The fifth area of loss is accountability. Operators of contracted out services, executives of corporatised and privatised services and companies competing with public services will not accept the same level of public accountability for service delivery and quality that government departments accept as appropriate for ensuring the public has adequate lines of redress. We will see where best practice ends up.

  The sixth key loser will be regional Australia. This will provide more than its fair share of the cost of the Hilmer magic pudding, because cross-subsidisation arrangements within agencies disappear as the profitable bits are increasingly separated from the unprofitable bits. Who gets left with the unprofitable bits? The remaining public sector agencies.

  Who benefits from this bill? Who benefits from this `far-reaching reform'? What does Mr Martin Ferguson of the ACTU say? We have had all this discussion in this chamber about the battlers. He wrote to the Treasurer (Mr Willis) in March this year demanding further discussion on the bill, saying, `It is contrary to the principles of the Labor movement to promote "reforms" based on reduced employment and reduced pay and conditions for workers. We ask that this be rectified forthwith.' Of course it has not been. The consumer movement, the environment movement, the Australian Council of Social Services, the Australian Local Government Association, public sector union and primary producer and professional bodies remain very concerned about aspects of this legislation. I do not believe that these concerns have been adequately addressed.

  Why do these concerns have to be addressed? We all know that the Industry Commission is on side, the economic rationalists are on side and the Business Council of Australia is on side. How could these predominantly male decision makers, safe in their own well paid positions, ever possibly be wrong! They will not be the ones who lose their jobs as a result of this. It is the ordinary Australian worker who has to be sacrificed in the name of competition and efficiency. Even if that is ever acceptable, the government fails in planning the transition for change.

  Of course things change. But this government has a very bad track record: it comes in first, sees afterwards and then says, `We didn't do enough about it' or, `Bad luck. That's the result.' Of course the Business Council of Australia's members are rubbing their hands with glee at the thought of all that government work to be contracted out to them—all of those profitable government service monopolies they can now attack while leaving the public sector with the unprofitable bits; all of those health, safety, consumer and environment regulations which will be struck down as uncompetitive and all of the money to be made from the inevitable privatisations this process will encourage.

  This parliament is here to do more than speak for the Business Council of Australia. It is here to speak for all the rest of Australians who may not have caught up with the effects of this piece of legislation but who will feel its effects.

  This bill does not enjoy the support of the key stakeholders in its implementation. It has been inadequately debated in the community at large. It is driven by ideology—the same ideology that has dominated this country for the past 12 years—rather than by good analysis. It is a zealous embracing of theory at its worst.

  In the committee stage the Democrats will be moving some amendments to this legislation and I will reserve my detailed comments on them until then. But, as you can see, we are not impressed with either the ideology underpinning this bill or the way in which it has not been adequately debated in this country.