The recently released draft report into competition policy proposes several bold steps for reform, but will there be the political will to deliver?
One of the major highlights of the heady microeconomic reform era in Australia during the 1980s and 1990s was a national competition policy encouraging all levels of government to wipe away regulatory and other impediments to the exercise of economic competition.
But, as with seemingly all other efforts to improve our economic potential, and in this case by unleashing competitive incentives by those engaged within the supply side of the economy, the competition policy reforms have remained incomplete, and in other cases compromised, by the interactions of populist political deliberation and vested interest lobbying.
As was so often the case Adam Smith had it right when he said, "people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public".
And when those people of the same trade happen to descend upon the centres of political power to influence and persuade, it is almost certain the policy outcome is that industries come to be sheltered by regulatory and other government favouritisms.
In turn, that means the politically uninfluential consumers end up having to bear the brunt of lower-quality goods and services at higher prices.
To a considerable extent, the latest draft report into competition policy, headed by esteemed economist Professor Ian Harper, has picked up where Fred Hilmer left off over two decades ago, repeating calls to inject further competition into pharmacies, agricultural marketing arrangements, professional licensing and standards, and taxicab operations.
Even so, the operating environment affecting these sheltered industries, and all others, has shifted seismically over the relatively brief span of 20 years.
A far less encumbered international trading environment enables consumers to enjoy a wide array of cheaper imports, while the disruption of conventional ways of producing and retailing, in the form of the internet and smartphone apps, empowers consumers to avoid incumbent suppliers too slow footed to provide the best value at the lowest price.
If anything, these influences reinforce the need to reform the longstanding sectoral holdouts on competition policy, and, indeed, to extend the reform envelope to new, and supposedly exempt, segments of the economy.
It is for this reason that Harper's suggestion to more deeply extend competition policy principles into public sector services is also welcome, particularly when many lower income earners lack the financial means of using anything other than services often monopolistically provided by governments.
As the draft competition policy review paper states, "given the size and pervasiveness of government in the Australian economy, as funder, provider and regulator, there is a need to consider new ways to foster diversity, choice, and responsiveness in government services."
According to Harper and his colleagues on the review panel, governments should separate funding, regulation, and service provision roles to avoid any conflicts of interest impeding competition especially in human services, and embrace a "choice presumption" by allowing portable funding and providing performance information.
In the draft report, governments are also encouraged to be open and flexible in allowing a wider range of entities, including not for profits and co-operatives, to provide services traditionally assumed by governments.
This is a particularly important point, as this sort of reform would raise the prospect of transcending the conventional privatisation debate into a broader agenda of "depoliticisation" for human and other services, whereby contestability and choice is extended beyond those, perhaps limited, segments of the public sector deemed amenable to for profit provision.
Another welcome feature of the Harper report is its reference to the impact of existing land-use regulations, particularly planning schemes and zoning restrictions, on restricting new entrants into markets, and impeding general competitive forces within the economy.
It is noted in the draft report that "the operation of planning systems can create barriers to entry, diversification or expansion, including through limiting the number, size, operating model and mix of business. This has the effect of reducing the responsiveness of suppliers to the needs of consumers."
Most Australians have experienced, or have at least seen, the pernicious effects of land-use regulations: astronomical housing prices and rents in a vast continent; heady commercial property rents feeding into high prices for inner city services; and even political corruption as property developers and similar interests aim to curry favour with ministers and regulators.
While competition policy issues in recent years seem to have been largely centred upon claims and counter claims about big supermarket chains predatorily sweeping smaller grocery stores out of the market, the costs posed by rigid and prescriptive land-use planning and zoning have been largely ignored.
The Harper draft report into competition policy makes for a welcome change in this respect, and would hopefully serve as catalyst for an extensive liberalisation of land-planning regimes.
Arguably the most controversial suggestion is the proposal that legislation be extended preventing a corporation, with a "substantial degree" of market power, engaging in conduct with the effect, or likely effect, of substantially lessening market competition.
This so called "effects test" has been rejected by previous government inquiries, with one past review into the Trade Practices Act, chaired by Sir Daryl Dawson, finding that "the addition of an effects test would increase the risk of regulatory error," and could discourage competitive conduct for fear of litigation.
In the competitive market, some firms will, as a matter of course, be threatened, or even confront the reality, of financial losses or market exit, as their attempts to economically please the buying public are found wanting, and this should only encourage them to improve their future efforts.
But there is a worry that a legislative effects test could exert a chilling effect upon competition, for the sake of protecting less-efficient market participants, and so one might hope the review panel would reconsider its stance on this issue between now and the release of the final report.
Setting aside the odd policy wrinkle here or there, the Harper draft competition policy review provides an ambitious roadmap to extend competition in places where it is greatly needed.
But with the governments currently preoccupied with military adventures, snooping on their own citizens, and fixing up often self imposed budget messes, it unfortunately seems far from certain, at this stage, that consumer interests for a more competitive Australia would even get a look into the political agenda.
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