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Thursday, 22 June 1995
Page: 1700

Senator BOSWELL (Leader of the National Party of Australia) (1.22 p.m.) —Some aspects of Senator Kernot's speech need to be amplified. The press in this country have not given this particular bill adequate debate. The Competition Policy Reform Bill 1995 is part of a national policy package which aims to free up competition in Australian markets. The objective is to systematically remove anti-competitive behaviour so that efficiency is improved to the public benefit. The more competition, the better off we will be.

  The National Party of Australia fully supports and endorses the concept that economic efficiency is best served in a purely competitive market, where businesses can get on with their responsibility to maximise profits. However, my concerns are not within the bill itself but in whether it is possible to legislatively and unilaterally impose an economic principle or philosophy on a nation that will achieve its lofty objectives.

  There are two major obstructions. The first is that while business must aim to maximise profits, the government must aim to maximise social or public benefit. The two do not necessarily go hand in hand. That is why, in this huge country of ours, we have community service obligations and cross-subsidies that may not maximise profits but do deliver equality of price of access by Australian citizens to telephone, mail, electricity and so on.

  If we all lived in a country the size of Tasmania, these would be of little moment. It is difficult to create a single legislative framework that simultaneously fulfils economic efficiency and social obligations.

  Several groups have expressed concern about the vulnerability of community service obligations in the competition policy reform process. The Australian Federation of Consumer Organisations has a range of concerns as to its consumer, equity and environmental impact.

  Sydney University senior economics lecturer, Dr Evan Jones, warned that the restructuring of community service obligations is, in practice, concerned with their eradication and will probably hit the rural sector most of all. Utilities, airports, telecommunications et cetera are all heading to segment market niches with the real competition for the profitable niches.

  The question is: what happens to the niches that are not profitable and do not attract competition? Is there an adequate safety net for people in rural areas? Will CSOs be treated as a politicised and expensive privilege rather than a right? At the first sign of a loss of state revenue, will community service obligations be soft targets for budget cuts?

  Mr Monagle from the ACT and the Community and Public Sector Union said:

We are concerned about the impact on services which are meant to be universally accessible, even if there may be a fee for service. What are the chances of them remaining fully accessible if they have to go to full cost recovery?

Queensland local government is concerned about water supplies and the cost of water if cross-subsidisation does not continue. At this stage there has been no firm agreement between states and local government on CSOs. It has to be negotiated. No wonder local government described their situation as one of `tremendous uncertainty and great concern about where all this is going'.

  How do we discern and define public benefit? The ultimate guardians of the public benefit are our Australian parliaments. Under the competition reform package, however, this power is abrogated to the competition commissioner. He or she will play an enormous role in adjudicating whether a specific market is operating in a way that is for or against the public benefit.

  I must make the point that we are not talking about the competition commissioner presiding over the fate of a couple of players in a few selective markets from time to time. We are talking about hundreds of thousands of Australian businesses and professions from all parts of the economy coming under the Hilmer microscope, whether at the state or national competition body level.

  So the second major obstacle in imposing a principle on an economy is the impossibility of knowing in advance how all these businesses will be affected in reality. Related to this is the other unknown: will the result actually be an increase in competition? This general lack of uncertainty and information about what the future holds under the Hilmer regime was reflected in many of the submissions to the Senate Economics Legislation Committee, which looked into the Competition Policy Reform Bill.

  It comes as a surprise to many that small businesses are part of this nationwide push for improved competition. Most attention has focused on enormous utility organisations and how big business will now be able to get into those markets and make them more efficient. But tucked away in the competition agreements signed with the states is a section calling for a legislative review and, where appropriate, reform of all anti-competition legislation and regulation. A timetable for reform is to be completed by every government and submitted by June 1996. How high will the goalposts be? We do not know.

  In order to achieve such a mammoth task, much of the responsibility will be delegated to bureaucrats. Indeed, the Goss government recently passed a transport infrastructure bill to introduce some Hilmer reforms, which essentially said that we will achieve all these reforms through regulation—`Just sign here on the dotted line. It's very simple'.

  The danger is obvious: unless you have a government committed to small business, which sees beyond the theory, then you are placing hundreds of thousands of small businesses, professions and farmers in a very vulnerable situation. They will have to go cap in hand to people who have never run a business in their life. I know Mr Carmody is in the gallery and I do thank him for his support over the last couple of weeks.

  No-one can reasonably object to improving legislation. No industry can reasonably object to changes that will improve efficiency and competition in the public interest. Many rural industries have worked hard in recent years to do exactly that. But I think it is quite reasonable to be wary of simplistic maxims such as, `Thou shalt deregulate', that assume a direct causal relationship with pure competition and public benefit.

  To better explain the scope of this legislative review, I seek leave to table an indicative list of Queensland legislation that would come under the Hilmer hammer.

  Leave granted.

Senator BOSWELL —The list is the result of advice forwarded to me by Queensland and Commonwealth parliamentary library research specialists. I am indebted to the National Party member for Maroochydore, Fiona Simpson, who is concerned about small business, for passing on some of this information to me.

  There are more than 100 acts mentioned here—from architects and psychologists to the building and motor trades, travel agents and racing and betting acts. The list does not even mention the number of regulations which would have to be individually looked at. Let us say that there are 100 acts in every state that would have to be looked at for possible reform to comply with the competition principles. There would be 800 acts straight off before you even added the state regs, the Commonwealth statutes and the regulations and ordinances.

  A senior Treasury official at Senate estimates advised that several of the states, including Queensland, had canvassed reasonably widely in doing a survey of legislation that would be subject to Hilmer principles. When asked to table the results of this survey on what legislation would be reformed, Mr Goss replied:

All legislation will have to be reviewed over the next five years to identify any anti-competitive elements and to subject them to a cost-benefit test.

He added:

The very intent of the reforms is that every anti-competitive provision in every piece of primary or subordinate legislation should be reviewed and carefully subjected to the cost benefit test.

He mentioned the magnitude and complexity of the legislation review. I think we can take it as read that the list I have tabled is just the tip of the Hilmer iceberg.

  Mr Goss admitted to `an audit of government activities by legal advisers to identify which business activities would be affected by the application of part IV of the Trade Practices Act to the Crown in the right of each state'. The Premier refused to table the audit because it deals with `commercial-in-confidence matters and is the subject of legal professional privilege'. What I believe he meant to say is that all private enterprise regulations will be exposed to the Hilmer sunlight but his government is going to be very careful about letting anyone get too close to government enterprises. That is a double standard. If the Goss government were truly committed to the competition principles, it would be open about government enterprise reform. It is happy to throw small business to the deregulating wolves, but not its own—which is the very area where most of the benefits of competition package are going to flow from.

  In order to coordinate such a project—because you could not have one state deregulating, say, pharmacies one year and another state deregulating them two years later—there is the option within the competition agreement to have a national review of a particular industry. So what you end up with, in many cases, is a competition commissioner doing the work, making the decisions and taking the heat off the state governments.

  While not constitutionally compelled to apply competition principles, the states have nevertheless signed a performance-tiered agreement and they will be rewarded with money, which was rightly theirs in the first place, so long as they reform in line with the Hilmer principles. The advocates of deregulation are sure that there are a number of state laws which have the effect of exempting behaviour under section 51 but are not visibly or explicitly doing so. Under the new regime, these laws must be identified and amended to explicitly relate to the Trade Practices Act and, hence, bring more areas into the Commonwealth jurisdiction through the possibility of disallowance.

  Local governments are already on the record as fearing a heavy reliance on the state government to grant exemptions under section 51, which would be disallowable. Do small businesses, professions and farming enterprises have anything to fear from all this? It sounds simple: get rid of anti-competitive laws so that we can have a nice, efficient economy with lots of competition and we will all be better off. The major problem is that removing some regulations will make the big bigger at the expense of some of the small. The big can then dominate a market and charge oligopolistic prices to consumers without necessarily any changes to efficiency—competition has not increased; it will have decreased.

  The Hilmer report and the subsequent Industry Commission report used the fundamentally flawed assumption of pure competition, which is not possible in industries characterised by unequal market power. A newsagent's submission said, `Our significant concern is that the unintended consequence of the legislation designed to foster competition may produce the opposite result.' In many Australian industries—from beer to newsprint and hardware to groceries—there are a few players who are so large that they do exert considerable influence on price and raise the barriers to entry. They can sustain undercutting price wars to force new competitors out and they can extort the lowest prices from suppliers, so they grow more dominant. This bill does nothing to foster competition in those very imperfect markets. In fact, if you take away regulations that were set down to ensure that consumer interests were protected—for example, allowing only pharmacists to own pharmacies—you place more power in the hands of these conglomerates who can move to new markets and force the small players out.

  Efficiency and internationally competitive product prices and standards are not served by undermining a healthy small business sector. Mr Bowe, the President of the Australian Taxi Industry Association, disputed the benefits of Hilmer deregulation by saying:

Certainly open entry is not going to produce a larger market of public to use those numbers. It would mean reduced income. In all of the areas of the world where it has been tried, reduced income has led to reduced quality of service and reduced quality of motor vehicle, and ultimately, the public, who are supposed to benefit from this ideological drive, are the sufferers. I hasten to add the point that, of the 21 states in America that embraced deregulation, 17—in the interests of the public—have had to re-regulate.

Any process of compensation would probably be about $2 billion to $3 billion. This industry sees potential turmoil in the states feeling that they have to deregulate the taxi industry in order to get the money promised by the federal government.

   Several groups feel powerless to prove public benefit, in the face of the Industry Commission and Hilmer reports, which have already ruled it out. Mr Bowe, from the taxi association, complained that on two occasions the Industry Commission was not prepared to accept that the price of a taxi licence had to impact on fares. The association's frustration in dealing with these ideologically driven bodies is only too apparent, and I would suggest that it is only the beginning. The Queensland canegrowers' message to the Senate committee was that they were:

. . . vitally interested in the outcome of deliberations on the national competition policy. Part of the structure which has enabled the Queensland industry to take its dominant position in the world is our selling mechanism, whereby all sugar produced in Queensland is acquired by the Queensland Sugar Corporation which acts as a single desk seller. We see the potential that particular interpretations of the competition policy reform bill . . . might make these selling arrangements difficult or impossible to continue. Our particular interest is in the `public benefit' test and the way in which this will be interpreted.

Local government is concerned that the competition agreement does not provide for state and Commonwealth enterprises to pay local government rates and charges. By integrating their operations, Queensland local governments have improved their efficiency in comparison with other states. They are scared that this efficiency will be lost through dissection or dismemberment of business units through the competition policy arrangements.

  In Queensland, sole invitee rights are accorded to small rural councils because road works form a substantial part of the local economy. Mr Waldock from the Queensland Local Government Association told the committee:

In those smaller communities, the roadworks gang of the council is the largest commercial activity in the area . . . the competition arrangements were such that councils were forced to disband those gangs because of competition with external operators who moved into the area and took advantage of commercial activity for a short period and then moved on somewhere else . . .

Several witnesses to the Senate committee looking into the bill were concerned that many aspects of the implementation would be worked out in the courts. I hope the government has noted this. Has it considered the potential disruption involved in implementing this competition reform package? Does it have the answering strategies in place?

  I hope that I have proven that a strong small business hand will be needed to guide competitive reform in the direction that will be healthiest for Australia. It is not this one piece of legislation before us that will doom small business, because all it does is set up the Commonwealth framework. So much will depend on bureaucrats who have never run a small business yet will sit in judgment of the futures of hundreds of thousands of small businesses. Since they work to put into practice a specific government's policy, it is ultimately about that government's commitment to, and understanding of, small business.

  Unless you have a strong fighter in parliament for small business, the outcome could be disastrous. There is a discussion these days about getting more women into parliament. I totally agree with that, but there is a category of Australian that is almost as rare as a bilby, and that is a parliamentarian with a small business background. I trod the boards of small business for 20 years before coming here, and I have tried to bring that perspective into this parliament. But when you have a Prime Minister (Mr Keating) who says of small business, `If they are feeling the pinch, they ought to say that small business is not for me and go back to PAYE employment,' I suggest that small business should be very concerned about Labor's approach to deregulating everything except the labour market. Maybe the Prime Minister was prophesying the Hilmer fallout when he said of small business, `This is as good as it ever gets,' meaning that it is probably going to get worse.