productivity commission development of competition policy, economic benefits and reform processes:...
TRANSCRIPT
Productivity Commission
Development of Competition Policy, Economic Benefits and Reform
Processes: Australia’s experience
Paul Gretton
3rd ASEAN-CER Integration Partnership Forum
Competition Policy: the CER approach
18 June 2013
Productivity Commission 2
This presentation will cover
• Background to reform in Australia• National Competition Policy Reform• Productivity Commission assessments of
reform impacts• Current reform agenda• Some key messages
Productivity Commission 3
The Australian Federal system – two sovereign political bodies, one geography
WesternAustralia
NorthernTerritory
Queensland
SouthAustralia
New SouthWales
Victoria
Tasmania
AustralianCapitalTerritory
Productivity Commission 4
The Australian Federal system – division of powers
• The Australian Government• Powers determined by Constitution (1901)• Defence, foreign affairs, international trade, customs,
currency• State governments have residual powers
• Powers over state owned and unincorporated enterprises, • Provision of health, education, law and order & other
services• Allocation of taxing powers
• Changed significantly since federation in 1901• Australian Government raises more revenue than
expenditure obligations – States raise less• Reform with inter-jurisdiction dimension needs
to be cooperative
Productivity Commission 5
Australia’s economic reform imperative
Per capita GDP ranking in OECD declined1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
1950
1952
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Australia ranked 14th
in 1983
Australia ranked 4th
in 1950
Source: The Conference Board and Groningen Growth and Development Centre, Total Economy Database, January 2009
Productivity Commission 6
Policy settings behind poor performance
• Fragmented, high cost manufacturing• Protected by tariffs and tariff-quotas
• Inflexible work practices• Low innovation and skill development• High cost utility services
• Government infrastructure monopolies
• State – electricity, gas, water, ports, rail
• Australian government – communications
• Regulated markets• eg agriculture, mining, professional services
Productivity Commission 7
Progression of reform in Australia’s federal system
• Removal of export licensing (mid-1960s)• Trade liberalisation (from 1973)
• Capital market liberalisation (from 1983)• Pro-competitive reforms (from mid-1980s)• Labour market deregulation (from mid-1980s)• Human services administrative reforms (from late 1980s)
• A coordinated ‘National Competition Policy’ (from 1995)
• … complemented by macro policy and taxation reform (GST)
Productivity Commission 8
Trade liberalisation – lower industry protection
Effective rate of assistance
Per cent
19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 200
5
10
15
20
25
30
35
40
Manufacturing
Agriculture
Source: Productivity Commission, Trade & Assistance Review, 2011-12, Annual Report Series, June 2013
Productivity Commission 9
National Competition Policy (NCP)
• Coordinated and systematic approach to reform• Manifested in establishment of Committee of Inquiry into
National Competition Policy in Australia (1992)
• Agreed in 1995 by Council of Australian Governments (COAG)• COAG Membership – Prime Minister & state premiers • Sets reform agenda & policy directions• …for policy reforms of national significance which
require cooperative action by Australian governments• By 2005 some matters still outstanding & further reform
potential identified
Productivity Commission 10
National Competition Policy framework
• Competition Principles Agreement• Policy objectives and directions
• Conduct Code Agreement• Extension of Australian Government Trade
Practices Act to include ‘exempt businesses’• Complementary state legislation
• Implementation agreement• Competition payments to states – redress vertical
fiscal imbalance, direct incentive to reform
Productivity Commission 11
What Australia’s National Competition Policy did
• Extended coverage of competition law• Gov’t businesses, unincorporated entities
• Reform of public monopolies• Structural reforms to public utilities eg separated
commercial & regulatory functions• Prices oversight of monopoly services by independent
authorities – electricity, communications• Third party access to infrastructure – railways, pipelines
• Initiated systematic review of all anti-competitive regulation • ~1800 items (eg agricultural marketing arrangements)
Productivity Commission 12
What the ‘related’ infrastructure reforms were
• Commenced in late 1980s• Affected key infrastructure sectors
• Electricity – establishment of national electricity market, structural separation, corporatization …
• Gas – removal of barriers to interstate trade, corporatization …
• Road transport – greater uniformity of regulation (driver licensing, standards & vehicle registration)
• Water & sewage – corporatization, pricing …• Implemented through intergovernmental
agreements• Some government enterprises also privatized –
but not reform requirement
Productivity Commission 13
Productivity Commission review - Productivity growth in major reform sectors over 1990s raised GDP
Percentage points
Total 2.5%
Productivity Commission 14
…and increased household incomes
Percentage change
Productivity Commission 15
Opening of economy and reform improved Australia’s relative economic performance
Per capita GDP ranking in OECD countries
Source: The Conference Board and Groningen Growth and Development Centre, Total Economy Database, January 2009
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
1950
1952
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Australia ranked 4th
in 1950
Australia ranked 14th
in 1983
Australia back to 5th
in 2008
Productivity Commission 16
Key National Competition Policy success factors
• Wide recognition of need for national reform• Agreement to reform agenda by Council of
Australian Governments (COAG)• Presumption in favour of competition• Effective implementation mechanisms
• Common principles• Independent oversight & monitoring bodies
• (ACCC, NCC) • Financial incentives – payments to States
Productivity Commission 17
Continuing national reform
• Reform imperative remains• Globalisation, Environmental management, Ageing of
population• COAG’s current reform agenda has 3 streams
• Competition and regulation stream • NCP continued
• Human capital stream • Reforms to raise workforce productivity & participation• Education, health, workforce participation
• The environment stream • Covering key environmental issues such as carbon
emissions & water management
Productivity Commission 18
COAG’s current implementation framework
• Supported by Intergovernmental agreements• National Agreements (mainly ongoing activities),
National Partnership Agreements (mainly new policies), & Implement plans
• Progress monitoring by COAG Reform Council• Independent reporting on impacts & benefits by
Productivity Commission every 2-3 years• Terms of Reference from Assistance Treasurer• Bring evidence on realized and potential impacts• Quantify economy-wide, regional & distributional effects• Assessment if scope for improvement
Productivity Commission 19
The Commission is to report every 2 to 3 years on economic impacts of COAG reforms
• Inaugural report released April 2012• It covered
• 17 ‘Seamless National Economy’ deregulation priorities
• Vocational education and training (VET)
• Required to provide information on• Economy-wide impacts, regional & distributional
impacts• Whether Australia’s reform potential is being achieved,
& opportunities for improvement
Productivity Commission 20
Business cost savings (gross) considered possible through SNE reforms
Productivity Commission 21
Achievement of cost saving would raise GDP
• … by $6 billion in current dollars per year• $3.6 b Direct benefits from cost reductions • $2.4 b Indirect benefits
• Majority of these gains could accrue by 2020
Share of gains realised over
time
Continued efforts
required to achieve gains
-20
0
20
40
60
80
100
2007-08 2014-15 2021-22 2028-29 2035-36 2042-43 2049-50
Productivity Commission 22
Vocational education — Higher attainment could raise national output in longer run
• Some increases in training activity achieved already – should deliver gains
• Reaching COAG target would require additional educational resources
• As always, projected outcome sensitive to modelling assumptions• Net gains sensitive to ‘cost
effectiveness’ of educational service delivery and relevance of qualifications
0
5
10
15
20
25
30
Reforms yet to be implementedReforms im-plemented
$ billions (2010-11)
Productivity Commission 23
Key messages
• Ongoing pressure to maintain/enhance international competitiveness
• Need high level political commitment and constant attention
• Establish & maintain workable framework suited to local conditions• Clear idea of reform objectives• Appropriate incentives for change• Effective implementation, including independent
monitoring & review• Community awareness of economy-wide gains
• Socialise economic benefits
Productivity Commission 24
www.pc.gov.au