The National Competition Policy was based on a presumption favouring competition, but with competition as a means rather than an end in itself. Foremost, the National Competition Policy sought to promote the public interest, such that the reforms implemented were subject to safeguards whereby governments weighed the costs and benefits on a case basis. Governments could consider efficiency, social, environmental, equity and regional objectives in assessing reform options.
Governments reported publicly each year on their implementation progress and each of the National Competition Council’s assessments, published between 1997 and 2005, reported on progress. Each year the Australian Government Treasurer determined the quantum of National Competition Policy payments to the states and territories after considering the National Competition Council’s assessment reports.
The National Competition Council's 2005 assessment report, which was its final National Competition Policy assessment report, provided a snapshot of the outcomes achieved under the National Competition Policy and final recommendations on the distribution of National Competition Policy payments.
At the request of the Australian Government, the Productivity Commission undertook a Review of National Competition Policy reforms, reporting in 2005.
Drawing from the Productivity Commission’s review, the Council of Australian Governments undertook a Review of the National Competition Policy, agreeing on 10 February 2006 to a new National Reform Agenda.
The National Competition Council’s 2005 assessment report: a snapshot of outcomes
Legislation review and reform (extant legislation)
Commitment: Governments were to review all legislation containing competition restrictions (as at 1996) to ensure that the restrictions are in the public interest and remove those restrictions that are not. The commitment applied to legislation (including local government measures) that governments identified as restricting competition so did not encompass legislation that impinged on efficiency, or involved excessive ‘red tape’, without necessarily restricting competition. This was a commitment under the Competition Principles Agreement.
Outcome: Each government identified laws regulating areas of economic activity, collectively about 1800 pieces of regulation. The identified laws applied to a diverse range of activities, from occupations and professions to agricultural marketing to transport and communications.
Governments reviewed the bulk of the identified laws, removing restrictions found not to provide a net public benefit. In aggregate terms, around 85 per cent of governments’ nominated legislation was reviewed and, where appropriate, reformed.
Recognising the resource cost to governments in conducting reviews and implementing reforms, and that the greatest community benefit would arise from reforming legislation with the greatest impact on competition, the approach under the National Competition Policy was to focus on ‘priority’ or high impact legislation. For priority legislation, the overall rate of compliance with the review and reform commitment over the period of the National Competition Policy was 78 per cent. The National Competition Council’s 2005 assessment report provides information on the legislation review matters outstanding at the end of the National Competition Policy, by jurisdiction.
Under the National Competition Policy, review and reform outcomes for some 800 pieces of priority legislation were scrutinised and outcomes in a further 1000 non-priority areas monitored. While most review and reform activity was undertaken by individual governments, there were some reviews conducted on a national basis. A related commitment was the requirement under the Agreement to Implement the National Competition Policy and Related Reforms to set national standards in accord with the Principles and Guidelines for National Standard Setting and Regulatory Action and advice from the Office of Regulation Review (now the Office of Best Practice Regulation).
The legislation review program resulted in a material reduction in unwarranted competition restrictions. Governments introduced significant reforms in tandem with systematically transforming many smaller productivity-impeding regulations. While some competition restrictions may have appeared relatively isolated in their impact, in total they were a significant drag on the growth potential of the Australian economy.
The National Competition Council’s assessments report on its scrutiny of the priority reviews. The National Competition Council also published a legislation review compendium, which combined each government’s review and reform program (with a summary of review and reform activity) in a single document. The sixth and final edition of the legislation review compendium was produced in 2010. Individual review reports obtained by the National Competition Council are also available on this site.
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Legislation review (new legislation)
Commitment: Governments are to ensure there is evidence that all new legislation containing competition restrictions is in the public interest. This was a commitment under the Competition Principles Agreement.
Outcome: The process of ensuring that regulation is effective and efficient regulation is referred to as ‘gatekeeping’. Effective gatekeeping is necessary to guard against the introduction of legislation that is not in the public interest. Gatekeeping requires rational assessment of the costs as well as the anticipated benefits of regulation.
Under the National Competition Policy, all governments established gatekeeping mechanisms that were capable, in principle, of complying with their commitment to assess the competition impact of new legislation.
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Commitment: Governments were to ensure regulatory and commercial neutrality between their significant government businesses (including local government) and competing private businesses where the benefits exceed the costs. This was a commitment under the Competition Principles Agreement.
Outcome: In all states and territories, major government business enterprises have been corporatised, other significant businesses have been exposed to competitive neutrality principles, and competitive neutrality complaints units have been established.
>> Read more about Competitive Neutrality
Commitment: Governments were to remove regulatory functions from government businesses and review the merits of separating any monopoly elements, before privatising a public monopoly or introducing competition. This was a commitment under the Competition Principles Agreement.
Outcome: With some exceptions, governments generally met these commitments, in particular recognising the need to remove regulatory functions from government businesses that operate in markets with private sector competitors.
>> Read more about Structural Reform
Commitment: Governments were to consider the merits of establishing independent sources of price oversight for government businesses enterprises. This was a commitment under the Competition Principles Agreement.
Outcome: All Australian governments determined that independent prices oversight arrangements would be in the public interest. This function generally resides within regulatory authorities.
The key institutions are the Australian Competition and Consumer Commission (Australian Government), the Independent Pricing and Regulatory Tribunal (New South Wales), the Essential Services Commission (Victoria), the Queensland Competition Authority, the Economic Regulation Authority of Western Australia, the Essential Services Commission of South Australia, the Government Prices Oversight Commission (Tasmania), the Independent Competition and Regulatory Commission (Australian Capital Territory) and the Utilities Commission of the Northern Territory.
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Extension of the Competition Code
Commitment: Governments were to enact legislation to apply the Competition Code, which reflects the restrictive trade practices provisions of the Trade Practices Act, to those unincorporated persons to whom the Trade Practices Act did not apply for Constitutional reasons. This was a commitment under the Conduct Code Agreement.
Outcome: All state and territory governments extended the Trade Practices Act prohibitions to unincorporated persons. Accordingly, the Competition Code now applies to all persons, including the Crown (in so far as it carries on a business), within a jurisdiction’s reach.
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Access to infrastructure services
Commitment: Australia was to introduce a national regime to facilitate third party access, on reasonable terms and conditions, to essential infrastructure services with natural monopoly characteristics. This was a commitment under the Competition Principles Agreement.
Outcome: Part IIIA of Trade Practices Act has been established to provide three pathways for a party to seek access to an infrastructure service: via declaration of the service; via an existing effective access regime; or by meeting terms and conditions set out in voluntary undertakings approved by the Australian Competition and Consumer Commission.
More information on the national access regime in Part IIIA of the Trade Practices Act can be obtained from the National Competition Council.
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Commitment: Governments were to implement structural, governance, regulatory and pricing reforms to promote competition in electricity generation and retailing.
Outcome: New South Wales, Victoria, Queensland, South Australia, Tasmania and the Australian Capitol Territory are part of an interconnected national electricity market. The benefits of the national electricity market include providing for customers to choose suppliers (generator, retailer and trader), the ability of generation and retail suppliers to enter the market, and the capacity for interstate and intrastate trade in electricity. Although outside the national electricity market, Western Australia and the Northern Territory applied the agreed reforms.
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Commitment: Governments were to remove legislative and regulatory barriers to the free trade of gas both within and across state and territory boundaries, and provide arrangements for third party access to gas pipelines.
Outcome: The objective of national free and fair trade in gas is largely realised, and the Australian gas market is increasingly competitive, dynamic and efficient. All governments removed regulatory barriers to full retail contestability and met commitments on structural reform and franchising and licensing principles.
Commitment: Governments agreed to a strategic water reform framework in 1994. The main objectives were to establish an efficient and sustainable water industry and to arrest widespread natural resource degradation, for which water use is partly responsible. The framework covered pricing, the appraisal of investment in rural water schemes, the specification of, and trading in, water entitlements, resource management (including recognising the environment as a user of water via formal allocations), institutional reform and improved public consultation.
Outcome: The National Competition Council��s 2003 and 2004 assessments found that each government was making progress towards the agreed water reform objectives though there was substantial work remaining particularly to implement compatible systems of water entitlements and appropriate environmental allocations, and to establish effective water trading arrangements.
Arising from the Intergovernmental Agreement on a National Water Initiative agreed by the Council of Australian Governments on 25 June 2004, the National Water Commission conducted the 2005 National Competition Policy water reform assessment. The National Water Commission found that overall states and territories had made progress in improving water resource management, though there were areas where agreed commitments were not met. In particular, the National Water Commission identified the failure to open up interstate trade in permanent water entitlements in the southern Murray-Darling Basin, and insufficient progress with water planning and addressing overallocated and overused water systems.
Commitment: Governments undertook to improve the efficiency of the road freight sector.
Outcome: The National Competition Policy road transport reform program comprised 31 initiatives covering six areas: registration charges for heavy vehicles, transport of dangerous goods, vehicle operations, heavy vehicle registration, driver licensing, and compliance and enforcement. Of these the Council of Australian Governments endorsed reform frameworks for 25 of the initiatives for assessment under the National Competition Policy.
The (assessed) road transport reform commitments were almost all in place by the end of the National Competition Policy. Of 147 reform elements across all jurisdictions, 143 were satisfactorily implemented. Not all road transport reform elements were subject to assessment under the National Competition Policy and there is significant scope for further productivity enhancing reforms.
>> Read more about Road Transport
Productivity Commission review of the National Competition Policy
In April 2004, the Australian Government asked the Productivity Commission to inquire into the impacts of the National Competition Policy and report on future areas ‘offering opportunities for significant gains to the Australian economy from removing impediments to efficiency and enhancing competition’. The Productivity Commission report found that:
'National Competition Policy (NCP) has delivered substantial benefits to the Australian community which, overall, have greatly outweighed the costs. It has:
- contributed to the productivity surge that has underpinned 13 years of continuous economic growth, and associated strong growth in household incomes
- directly reduced the prices of goods and services such as electricity and milk
- stimulated business innovation, customer responsiveness and choice
- helped meet some environmental goals, including the more efficient use of water.
Though Australia’s economic performance has improved, there is both the scope and the need to do better. Population ageing and other challenges will constrain our capacity to improve living standards in the future. Further reform on a broad front is needed to secure a more productive and sustainable Australia.'
Council of Australian Governments review of the National Competition Policy
On 3 June 2005 the Council of Australian Governments agreed on the need to maintain reform momentum and to lock in the substantial benefits achieved. It stated that the National Competition Policy measures had been ‘pivotal in boosting the competitiveness and growth of the Australian economy and the living standards of all Australians’.
Further the Council of Australian Governments endorsed the need for continuing reform. It stated that:
- It is important not to be complacent about the continued performance of the Australian economy. Resting on the achievements of the last decade will cost the Australian community opportunities for greater prosperity.
- Australia’s productivity performance is under threat, with further reform essential if the economic expansion of the last 14 years is to continue.
- The Australian economy is operating in an intensely competitive international environment. As a small trading nation, Australia will drive its economic growth by minimising barriers to trade and maximising its business flexibility.
- The case for continuing reforms on a collaborative basis is clear. '
The Council of Australian Governments noted the Productivity Commission's conclusion that the National Competition Policy had delivered substantial net benefits to the Australian economy and across the community, and all governments recommitted to the principles contained in the Competition Principles Agreement.
National Reform Agenda
On 10 February 2006 the Council of Australian Governments endorsed a National Reform Agenda to help underpin Australia’s future prosperity. The proposed broad-based agenda had three streams ─ encompassing human capital development, competition and regulatory reform.
The competition stream involved the continuation and addition of the National Competition Policy reforms. It was intended to further boost competition, productivity and the efficient functioning of markets, focusing on transport, energy, infrastructure regulation and planning, and climate change technological innovation and adaptation.
On 20 December 2007 the Council of Australian Governments expanded this agenda and established seven intergovernmental working groups to progress reform, including groups on business regulation and competition and on infrastructure planning and investment. On 26 March 2008 the Council of Australian Governments agreed to a number of measures to improve regulation nationally.