Renew Drive for Growth

Nine years ago Australian Governments decided to collectively and systemically promote competition and markets under the banner of National Competition Policy.

This represented a fundamental shift in government policy.  Governments in Australia and elsewhere have historically been anti-competitive.  That is, they have traditionally pursued policies aimed at restricting markets and stopping competition with regulation, government control and ownership.  Moreover, they have tended to act in an incoherent and hodgepodge manner, with their rationale left unstated and untested.

The market based reform agenda did start prior to, and extend beyond, the formal NCP process.  However, NCP formalised and greatly expanded the scope of the process.

There is no doubt that for the country as a whole, and for most Australians, NCP has been hugely beneficial.  The research indicates that it has contributed significantly to the rejuvenation of the Australian economy over the last decade.  And the benefits go beyond just growth.  The policies have helped make the economy more robust and able to adjust to unforeseen and potentially harmful shock -- such as our major trading partner, Japan, descending into a decade long recession.  It has given consumers new freedoms -- for example in most states we no longer have to organise our shopping according to the holiday preferences of shopkeepers.

Of course, the policy has not been positive for all.  It has resulted in the erosion of many privileges.  It has made many producers work harder and smarter.  It has exposed them and, to a lesser extent, consumers to more of the risks of their own actions.  It has impacted on regions and people differently, and sometime negatively.  In particular, it has had a significant, adverse impact on people and regions, such ex-SECV workers in the LaTrobe Valley, whose livelihoods were sustained to a great extent by government protection.

But on the whole however, the benefits have greatly exceeded the costs.

The question at hand is, what next?  The Policy is up for review.  Funding provided by the Commonwealth, some $15 billion to date, is coming to an end.  And the process is losing some momentum, both political and administrative.

The truth is that the job as initially gazetted is only half done -- albeit the most important half.  Moreover, there is scope to expand the NCP to other areas, including industrial relations and government services.

Moreover, there is great need to continue the pressure for greater levels of productivity.  While productivity growth has increased markedly over the last decade, their levels remain far below those of other nations (around 20 per cent below the US) as a result of previous decades of stagnant growth.

The Productivity Commission is currently undertaking a review of the process which will provide guidance to governments.

The real question is one of political will.  Most of the States have been at best reluctant participants, pulled into the process more by the lure of money than a commitment to market based reform.  The Howard Government has done the right thing and carried out the leadership role inherited from the Keating Government.

The process now, however, now needs to be invigorated.

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