Competition policy reforms in
Australia
18 February 2014
Matt Crooke, Minister-Counsellor (Economic)
Australian High Commission, New Delhi
Overview
• National Competition Policy
– origins
– key components
– securing and maintaining support
– outcomes and lessons for India
• Australia’s ‘Root and branch review’ of
competition
Background
• Federation with three levels of government
• Two types of government agencies at the
Commonwealth level
– Government departments and independent
agencies
History to NCP – 70s and 80s
• Trade Practices Act introduced in 1974
• Australian economy was heavily regulated:
– Fixed exchange rate/regulated financial sector
– Trade barriers/tariff protected industries
– Government ownership of utilities
– Substantial price, product and wage regulation
• In the early 1980s, large scale reforms removed
many of these restrictions
– Created pressure on many industries to adapt
History to NCP – 90s
• By the early 1990s, Australia recognised a need
for further microeconomic reform.
• Australia’s international competitiveness was
lagging, and many sectors were highly inefficient;
this was patently due to weak market forces at
home.
• In 1992, an independent inquiry into the matter
was launched – known as the Hilmer Inquiry.
History to NCP – 90s cont.
• The Hilmer Report recommended sweeping changes
to Australia’s competition framework.
– Acting on the Report, Australia’s Federal and state
governments agreed to the National Competition
Policy Reform package in 1995.
• The overarching vision was to create national
markets.
• This has further evolved into a guiding vision of
creating a ‘seamless national economy’.
National Competition Policy
• Agreed by all levels of government in 1995
• Reforms include:
– Review of legislation that restricts competition
– Universal application of pro-competitive
legislation, particularly the TPA
– Reforms of public monopolies (transport,
electricity, gas and water)
– Implementation of competitive neutrality to
government businesses
– Third party access to significant infrastructure
Legislation review
• Guiding Principle:
– Legislation should not restrict competition unless
it can be demonstrated that:
 the benefits of the restriction to the community as a
whole outweigh the costs; and
 the objectives of the legislation can only be achieved by
restricting competition.
Reforms to public monopolies
• Key principles for restructuring public
monopolies include:
– Separation of regulatory and commercial functions;
– Separation of natural monopoly and potentially
competitive activities; and
– Separation of potentially competitive activities into a
number of smaller, independent business units
• In addition, assets were privatised where
government ownership was no longer
justified.
Reforms to public monopolies –
competitive neutrality
• A distinguishing feature of Australia’s reforms
to public monopolies is the inclusion of
competitive neutrality.
– The Hilmer Review recommended that all levels of
government agree that government businesses
should not enjoy any net competitive advantage
by virtue of their public ownership.
Third-Party Access Regimes
• The point of Third-Party Access Regulation is to promote
the economically efficient operation of, use of, and
investment in infrastructure facilities with natural
monopoly characteristics.
• This can help to promote effective competition in
upstream and downstream markets.
– It is often economically inefficient to duplicate such
infrastructure.
– ‘Standard’ market power provisions were seen as
insufficient to deal with natural monopolies.
Implementing the NCP
• National Competition Council undertook
implementation assessments
• Competition payments were made to the
States based on those assessments
Securing support
• National Competition Policy agreement was a
significant achievement
• Initial support achieved by drawing on
evidence of potential gains
Maintaining Support
• Challenges of misinformation and vested
interests
– Seek to overcome by transparency and assistance
on case-by-case basis.
• Broad nature of program
– Those who lose from one reform, gain from
another
• Public interest
– Any reform is in the community’s interest
Public interest test
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Environmental considerations
Social welfare and equity considerations
Occupational health and safety
Economic and regional development
Interests of consumers
Competitiveness of Australian businesses
Efficient allocation of resources
Outcomes of NCP
• 2005 Productivity Commission Review of
National Competition Policy
– Significant net economic benefit of the reforms
• Lessons from NCP inform current and future
competition and deregulation reform agenda.
• Principles from NCP manifest in current
policies, including current productivityenhancing reforms.
Competition Policy Review
• The Government’s root and branch review of
competition laws and policy will commence in
early 2014.
• The review is intended to identify long-term
improvements that can be made to the
regulatory and policy framework to improve
the productivity of the Australian economy.
Possible lessons
• Continue to build the case and be ready for
opportunities – well-devised microeconomic reform
improves peoples lives for the better
• Independent, vibrant public institutions that support
reform and are as sector-neutral as possible –
towards a vision of well-functioning national markets
• Allow forward-leaning jurisdictions to drive process
and consider fiscal incentives in support of national
reform outcomes
Competition policy reforms in
Australia
18 February 2014
Matt Crooke, Minister-Counsellor (Economic)
Australian High Commission, New Delhi