National Competition Policy Linking benefits with communities Doug McTaggart National Competition Council Regional impacts of NCP • PC Inquiry “Impact of Competition Policy Reforms on Rural and Regional Australia”, October 1999, concluded that in the long-run: – only one in 57 regions estimated not to benefit from NCP in terms of output – all regions are estimated to benefit in terms of average income per person – majority of regions will either increase employment or reduce it by an amount that can be absorbed in one year’s growth Doug McTaggart, National Competition Council -- July 2001 Regional impacts of NCP – five of 57 regions would require five or more years of (relatively slow) growth to offset NCP job losses – ten of 57 regions which lost jobs over the 10 years to mid-1990s will lose more jobs as a result of NCP – reform inevitably creates winners & losers – these 15 regions comprise 30% of Australia’s land area but only 6% of national employment Doug McTaggart, National Competition Council -- July 2001 Benefits from NCP • In COAG 1995 report, IC estimated procompetitive reforms would increase GDP by $23 billion -- 5.5% of GDP • Some corroborating evidence since then: – productivity growth 1% above previous trend for last 6 years consistent with IC projections – productivity benefits passed on to consumers in form of lower prices Doug McTaggart, National Competition Council -- July 2001 Benefits from NCP – prices have fallen in many areas including electricity, gas, rails, ports, telephone, post – prices have risen in some areas including water – at this stage beneficiaries have more often been larger metropolitan users – expected to flow through to all users over time – mixed results on service quality Doug McTaggart, National Competition Council -- July 2001 Employment effects of NCP • Early direct effects of job losses – concentrated in gas, electricity, rail, Telstra – distributed over both urban and regional areas – usually the result of reductions in overmanning which had developed while government businesses enjoyed a monopoly • some job losses offset by increase in private sector jobs Doug McTaggart, National Competition Council -- July 2001 NCP blamed for many problems • PC reported that NCP is widely perceived to be responsible for – withdrawal of government services – demise of local businesses – closure of country bank branches – generally speaking, the major factor behind population decline in parts of country Australia – a variety of social ills Doug McTaggart, National Competition Council -- July 2001 But there are many other external influences • Downward trend in world prices for agricultural and mineral commodities • Technological advances • Changes in consumer attitudes and tastes • Changes in lifestyle • Other government policy changes Doug McTaggart, National Competition Council -- July 2001 So why does NCP have such a bad name? • Too early for long-run results to flow through? • Early gains not evenly distributed? • Adjustment issues not well handled? • Blamed for outcomes of other external unrelated events? • Is NCP well understood? Doug McTaggart, National Competition Council -- July 2001 What NCP is not! • Requirement for privatisation and asset sales • Compulsory competitive tendering • Contracting out • Financial market deregulation • Industrial reforms • Cutting the public sector • Reductions in welfare or social services • Removing CSOs Doug McTaggart, National Competition Council -- July 2001 What NCP is • Extending competition into areas previously dominated by government monopolies – provision of infrastructure – legislative restrictions on competition • Extending competition into areas of private sector previously exempt – for example, the professions Doug McTaggart, National Competition Council -- July 2001 NCP Agreements • Extend TPA to all businesses – previously most government and some private sector businesses exempt • Introduction of competitive neutrality • Review of all laws that restrict competition • Reform of all laws that restrict competition only if the costs to the community of the restriction outweigh the benefits Doug McTaggart, National Competition Council -- July 2001 NCP Agreements • Development of a national access regime • Specific regulatory reforms to the gas, electricity, water and road transport industries – begun earlier under auspices of COAG but now included in NCP Doug McTaggart, National Competition Council -- July 2001 Not competition for competition’s sake • There is an assumption that competition provides best outcome • But competition seen as a means to an end: – Community benefit • Three central reforms • competitive neutrality • structural reform of public monopolies • legislation review and reform should be determined on a case by case basis using the public benefits test Doug McTaggart, National Competition Council -- July 2001 What is in the public benefit test? • All relevant factors • For example: – ecologically sustainable development – social welfare and equity – OHAS, industrial relations, access and equity – economic and regional development – investment and employment growth – costs of change Doug McTaggart, National Competition Council -- July 2001 What is in the public benefit test? – consumer interests – competitiveness of Australian business – efficient allocation of resources • But, other factors may be relevant • The above list is not all-inclusive Doug McTaggart, National Competition Council -- July 2001 Example: reviewing a SMA • Factors likely to be considered: – impacts of barriers to competition on farmers’ income – welfare of Australian consumers – value of Australian exports – environmental impacts – administrative and regulatory costs – socio-economic impacts on regional ccommunities Doug McTaggart, National Competition Council -- July 2001 Example: reviewing a SMA – employment effects – economies of scale in transporting and marketing – agricultural productivity – effects on value-adding industries – anything else that is relevant – list is open-ended Doug McTaggart, National Competition Council -- July 2001 Who conducts public benefit test? • Relevant jurisdiction – Commonwealth, State, local government • Not National Competition Council • Challenging task for governments – making judgements on importance of each factor – need for transparent analysis and reasons – properly constituted review process Doug McTaggart, National Competition Council -- July 2001 Role of NCC • Provides policy advisory and national oversight of NCP • Does not set reform agenda • Funded by Commonwealth but responsible to all Australian governments • Four roles: – assessment of Governments’ progress in implementing their agreed reform agenda • recommendations as to level of competition payments Doug McTaggart, National Competition Council -- July 2001 Role of NCC – Advice on design and coverage of National Access regime – Community education and communication of specific reform implementation matters and NCP generally – Specific projects as requested by a majority of Australian Governments Doug McTaggart, National Competition Council -- July 2001 National Competition Policy • A reform package initiated by and overseen by all Australian governments (COAG) • Competition reforms to be in community’s interest, judged by rigorous application of public benefit test • NCC’s role is in assessment of governments’ progress against their own agenda Doug McTaggart, National Competition Council -- July 2001 National Competition Policy Linking benefits with communities Doug McTaggart National Competition Council