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Monday, 26 June 1995
Page: 1754


Senator MARGETTS (4.46 p.m.) —We have before us today with the Competition Policy Reform Bill 1995 a piece of legislation which the Greens (WA) take very seriously indeed. It is a bill with huge implications. The National Farmers Federation, in its submission about this bill, wrote:

. . . it is a starting line from which we should expect the pressure of competitive forces to bend, reshape, or shatter many other policy areas as the economy adjusts.

During the hearing, the National Farmers Federation indicated that it was not concerned if local government was badly affected or even went under as a result of part of these implications, because it thought local government was a problem for farmers anyway.

  I intend to deal with some of the broader issues in this second reading debate and talk about details in the committee stage. This is a major bill. The issue of competition policy is both technically complex and engages debates on the function of government, the relation of government to commerce, human society and the natural world, competition between social good and unregulated capital accumulation or private investment and the relationship of various tiers of government. What we do here will affect all these things into the future.

  It is indeed unfortunate that debate has been so limited on this issue. It seems another of the areas where, philosophically, there is little difference between the major parties. As a consequence, many issues have not been brought out. Competition policy is primarily about extending the power of the private sector. You can talk about safeguards, but these are proposed to calm concerns about this extension of the private sector into what has been considered the public domain. Competition policy is about eliminating the public domain, maybe not entirely but at least as far as possible. Why would anyone want to do that? A few people—generally people with economic power—might make a good profit out of it. But this is not the reason we are told we should want this. The reason we are given is that the private sector will somehow be more efficient and cheaper and that we will all somehow pay lower bills.

  The Industry Commission says that there will be an increase in gross domestic product which, on average, is equivalent to a gain of $1,500 per household. It does not exactly say that you or I will get that gain or that ordinary people will get it. It does not say who will get it. Some will get the gain and, if it is only a few people and companies, it might be only $1,500 on average but it will be a lot more for the few who benefit.

  The relationship between profits and jobs is not direct. This is the same argument we hear about wage restraint, allowing companies to sack large numbers of workers, et cetera. If companies are profitable we will get jobs, so our interests are served by making sure that the wealthy and powerful get as much money as possible. As an argument, this has never really convinced me. The Industry Commission predicated the benefit of competition policy on an increase to GDP of 5.5 per cent, a much larger increase than that predicted by any but the most optimistic as a result of a successful Uruguay Round of GATT. This Industry Commission prediction is based on a number of more specific predictions.

  Professor John Quiggin, who has been mentioned by several speakers in this debate, makes a number of specific critiques of the Industry Commission report. He notes that the commission claims in its study that all productivity and economic improvements are results of competition policy but not of the Hilmer competition policy. Many gains are results of general macro-economic reform and many have already happened. The commission also goes much further than Professor Hilmer in its agenda upon which the commission claims are based. The commission bases its figures, in part, on its own agenda for extreme privatisation and deregulation beyond that which Hilmer or government are proposing or accept.

  Professor Quiggin notes that many improvements in total factor productivity happened at the same rate or at a greater rate before `competition policy' or `macro-economic reform' became buzz words. Improvements in productivity in this case cannot be attributed to such reform. They are the result of general, technical and management practice improvement that happens anyway. Many of the suggestions that the Industry Commission put forward are simply nonsense. They suggest that competition will automatically result in world's best practice. How? Why? When you say the world's best practice in telecommunications is the operation of a Swiss phone company, competition cannot duplicate this in Australia. There is no way that our telecommunications system will ever be physically equivalent to that of Switzerland. Without being physically equivalent, we simply have a very different situation where we need to establish telecommunications over a continent and between this continent and others often in another hemisphere. This is not to say that something is wrong with Australian telecommunications; it is regarded highly. We export telecommunications service, but we will always have longer transmission paths.

  We will not meet the world's best practice in water provision. Technically, we might be excellent in what we do, but we live on a dry continent and it will always be more expensive to provide water than those countries that have a lot of water readily available. The argument for this policy is basically flawed. There is no evidence from other countries that privatisation of essential infrastructure—power, water and so on—has resulted in lower costs for consumers. There is a lot of evidence from nations like the United Kingdom that privatisation has resulted in higher costs and that poor management has degraded infrastructure provided by public utilities. This is because such infrastructure constitutes natural monopolies. Where the private sector operates for profit, the temptation is always to use monopoly power to increase profits by raising prices or by decreasing quality or sustainability.

  Where infrastructure has been in private hands for a long time, as with the power industry in the United States, it is generally highly regulated. There are costs to government of overseeing that regulations are met and court actions where they are not. There is also endless argument about whether price rises are justified. There is not a lot of evidence that having a highly regulated private monopoly industry has made these private utilities more efficient or responsive to public values. In fact, it is pretty clear at this point that any benefit to ordinary people will have to come through an improvement in GDP, because it will certainly not come from reduced costs. This is essentially true for rural communities, which will be hit again and again as efforts are made to destroy the principle that all Australians should have access to basic services at the same cost or as near to that as possible.

  Basic services include power, water, phone services, postal services, banking services and so on. It is pretty clear that government plans to eliminate cross-subsidies and move to a user pays or, more properly, a cost recovery system. This means that the current system, where everyone pays but pays the same, will be abandoned in favour of a system where the rural user—mainly rural users—will pay more for power, more for water, more for transport, more for everything. The privatisation of the Commonwealth Bank will probably mean that branches in small towns will be closed down, since it appears that other banks find the cost of maintaining branches too expensive.

  There are other instances of questionable gains. There are real benefits where, for example, small town post offices can act as an agent for the Commonwealth Bank or other bodies. There are real efficiencies here—what are called economies of scope—which are likely to be lost as soon as all these agencies become fully corporatised or privatised. A huge load will be placed on them for allocating costs, billing one another, keeping track of it all and for examining claims to ensure there are no rorts. These problems are all avoided when it is simply a government agency helping out efficiently. The book cost to the post office may be reduced, but it is likely to mean higher costs to the community. I do not believe it would ever mean a reduction in the cost of postal services.

  We have already started to see the effects of competition policy in Victoria. We have the farcical situation where Australian public infrastructure is considered so inefficient that it must be broken up and privatised. To whom will it be sold? The short list is for foreign firms, none with Australian equity. Among those shortlisted is Electricite de France. Wonderful! Australian public infrastructure is so inefficient that we will sell it off to French public infrastructure. If all public infrastructure needs to become a paragon of efficiency is overseas bids, why do we not have SECV bid to run a power grid of some other country? What are the qualifications of Electricite de France for running a grid based on coal fired power plants? Its experience of several decades is running a grid based on nuclear power. What a wonderful candidate, especially considering what is currently happening at Mururoa!

  Why should we worry? There are all sorts of safeguards. We are told that there should be community service obligations or CSOs. We are told that we will have competition to hold down prices and that we will get this by breaking up utilities. We are told that there will be a new commission which will have the ability to fix prices. We are told that this commission will also have the power of the Trade Practices Commission to eliminate monopoly practices. It will even have more power. It will be able to override the states, ensure consistency and eliminate the petty differences that interfere with business. It will fix everything. Unfortunately, when you ask for particulars, there are none. I note that this bill is being put through prior to the release of the final report of the EPAC private infrastructure task force.

  I note that the Assistant Treasurer (Mr Gear) said in a press release two weeks ago that all governments—presumably state and federal—will publish by June 1996 their agenda on implementing the competition principles agreement. A vital part, according to the press release, `will be the way each government intends to protect the public interest, and to deliver community service obligations. Equally important is the role each state sees for local government in the reform process.' In other words, there are currently no guidelines, statements or strategies about how the public interest will be protected. This information will not be available until next year, but we are being asked to pass the bill now. It has also come to my attention that during estimates hearings Senator Harradine asked a number of questions on the impact of cost recovery, especially on rural communities. The answers were simple: the Treasurer's department had no idea of the impact and had no data but would start to look at the issue some time in the future.

  The government is pushing this through without any real idea of what its effect will be, but, if you ask the government—as I asked recently—it will blithely cite the wonderful benefits according to the Industry Commission. This is a total assurance of the ideologue that if we do the right thing, somehow everything will be better. There is no analysis of that `somehow' and no `how'. The simple assertion is that, by selling everything off, by eliminating every regulation parliaments of the past have brought in for some reason and by preventing parliaments of the future from making many sorts of regulations, this will automatically bring huge benefits.

  The evidence has not been presented. The studies have been started but have certainly not been completed. Here we are about to pass this bill. Why? Is this responsible? Is this sensible? The evidence from the UK is not good; we have been told, `We will do better.' Where is the plan? Where are the resources? Apparently, those will be developed later and we should pass this bill entirely on trust—and put our stocking out for Santa while we are at it.

  One of the most disturbing aspects is the nature of the bill that we are being asked to support. The parliament will not be having an input or be reviewing competition policy. It is being asked to set up a new commission, the Australian Competition and Consumer Commission, under a minister. This new commission will have the amalgamated power of the Trade Practices Commission and the Prices Surveillance Authority, plus the powers to set prices—plus the power to review virtually all present and future state and local legislation to ensure it is consistent with competition policy.

  What is competition policy? That is one of the details that has not been worked out yet. The parliament is not asked to set the policy, to review it or to pass it. It is asked to set up another body, the National Competition Council, to suggest its policy. It will also set up the Australian Competition Tribunal, to judge and enforce its decisions. So we are being asked to set up an organisation which will have sweeping powers through regulation, will take advice from its sister organisation, which we will also set up, and will be effectively independent of federal parliament except in its responsibility to the minister, who will have the power—in fact, the duty—under this legislation to examine recent and new state and territory laws to ensure that it `meets the requirements' of competition policy, although some pre-1994 legislation will be grandfathered and allowed to continue.

  So we have an organisation at federal level, relatively independent of parliament but under the executive power of the minister, which can effectively interfere in state activities at a level far beyond anything the federal government has been able to do in the past. It can dictate to the states on anything it feels has anti-competitive implications. Since it brings much of the arena of public service into the potentially competitive area, it will look at all regulation affecting any commercial activities for interference with competition. It means that it can interfere in almost anything.

  I ask the National Party to remember the promises relating to the World Trade Organisation and GATT and the degree to which we gave up effective power to assist and regulate activities connected with agriculture. This bill will give far greater powers to a non-parliamentary federal body to make sweeping changes to all sorts of things—from markets to electricity and water prices, to availability of services to rural communities. Don't think for a moment that it will guarantee services or reduce costs. If there is one thing there is unanimity on, it is that rural users are likely to face higher costs on a wide range of items.

  Now we are being asked to give up effective power to legislate on the bulk of these issues and to set up this independent organisation which will be able to pursue its agenda. The particulars of the agenda remain unstated. Safeguards are mentioned but remain undefined. We are asked not only to set up this organisation but to empower it to override the rights of state and local governments and the community without referring to federal parliament.

  We are told that the states agreed. When? How? It is an object lesson in how this is likely to work. The premiers—not the people or the legislatures of the states of Australia—agreed with the Prime Minister (Mr Keating). Why did they agree? They agreed because Canberra has the power of the purse and used it ruthlessly. The states were `rewarded' with a promise of compensation payments.

  I hope people in this place realise how good promises are when made to get a result, how long they last and how easy it is to change the terms of a promise after the thing wanted has been attained. Promises we thought were firm and sound seem to change shape, get smaller and become strangely slippery. The thing we hear over and over again in the debate on this bill is that it is not well defined and not ready for legislation. The thing we hear over and over again when problems are brought up is, `Yes, let's pass the bill; we will look into it.' We hear again and again that we need to pass the bill and it can be fixed later.

  I say no; it should not be passed now. We should at least wait for the answers to Senator Harradine's questions. We should wait for the result of EPAC's inquiry. We should wait for the states to put out their agenda and their public interest provisions and see whether these agenda and provisions are accepted. We should have some idea of what we are getting into before we create an organisation that will have a life of its own.

  This bill will allow the establishment of a `starting line from which we should expect the pressure of competitive forces to bend, reshape, or shatter many other policy areas as the economy adjusts', as I quoted at the beginning. If we have any desire to preserve or protect any existing areas of policy, we should wait until the starting line is drawn and the course laid out before we commit ourselves in this way. Needless to say, the Greens will be opposing this legislation.