The ANU Crawford School hosted an excellent forum on Friday, mostly a retrospective from key players in the 1995 Hilmer competition reforms, but also with some interesting insights into competition policy design and work left to do for the Abbott Government's new review.
Peter Harris scoffed at the idea that all the low hanging fruit (in terms of economic reform) had been picked—there never was any low hanging fruit. Getting agreement to undertake the Hilmer review was extremely difficult, and so too was implementing the competition reforms.
Peter Harris scoffed at the idea that all the low hanging fruit (in terms of economic reform) had been picked—there never was any low hanging fruit. Getting agreement to undertake the Hilmer review was extremely difficult, and so too was implementing the competition reforms.
The Productivity Commission in 2005 (10 years after the Commonwealth and the States entered into the National Competition Policy Agreement) found that National Competition Policy had:
- contributed to the productivity surge that underpinned (then) 13 years if continuous economic growth (now 22 years and counting)
- directly reduced prices of goods and services to business and consumers, in areas such as electricity and milk
- stimulated innovation
- improved environmental goals, including in water policy
The Commission emphasised the productivity gains: the highest recorded productivity improvement in more than forty years. But it also found – conservatively – that at least 2.5 percentage points had been added to GDP before any dynamic efficiency gains, or about $20 billion annual income in the dollars of the day.
Businesses benefited most directly, but households also gained.
On the negative side of the agenda, some regions suffered disproportionately and smaller States and Territories found commitments to undertake comprehensive review programs hard to manage.
State Treasuries were locked in as proactive agents of change because the fiscal benefit from incentive payments for reviews and reforms achieved was too important to ignore.
Politicians needed to remain publicly in support, because the idea of reformist governments had taken hold. The cost of not participating remained higher in public perception than the reward for any go There was adjustment pain all round, to be sure; but no one jurisdiction could backslide while others were out there taking their hits.
And there was transparency, public reporting of targets, that great incentive to good behaviour.
It is sometimes said that only chemists and newsagents survived the NCP unaltered. In fact, there are many more areas of potential productivity reform which are survivors from that era:
Politicians needed to remain publicly in support, because the idea of reformist governments had taken hold. The cost of not participating remained higher in public perception than the reward for any go There was adjustment pain all round, to be sure; but no one jurisdiction could backslide while others were out there taking their hits.
And there was transparency, public reporting of targets, that great incentive to good behaviour.
It is sometimes said that only chemists and newsagents survived the NCP unaltered. In fact, there are many more areas of potential productivity reform which are survivors from that era:
- limits on retailing hours and on how close to each other similar businesses can set up (eg big box warehouses)
- coastal shipping competition restrictions
- aspects of international aviation (ownership rules)
- some rail freight services, eg with privatisation of Queensland Rail, now Aurizon
- foreign investment rules
- restrictions on professions, both limits on entry and competitive substitution
- water trading from rural to urban areas
- large project approval process
- taxis
The PC estimates that reforms in these areas could be roughly worth $6 billion per annum.
More important than quantum of GDP improvement, however, is scope for innovation and dynamic efficiency gains.
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