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Peter Forsyth

BTRE Colloquium

14-15 June 2006

Summary and Policy Challenges

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Approach

• Focus on Issues and policy challenges• Not on industries/ sectors

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Policy Challenges

• Public private interface• Industry restructuring• Regulation-how light?• International dimension-aviation• Investment appraisal• Enduring roles for government

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Public Private Interfaces

• PPPs are great- as long as the government is not involved • PPPs and other forms, e.g. privatisation of parts of systems• Create many problems-e.g. Cross City Tunnel (Harris)• Esp with private links in public networks (Ergas, Meyrick)• Actuality- many aspects very unsatisfactory (Ergas, Harris,

Mees)• Have governments really tried to get them right? • Grappling with complex issues, e.g. allocation of unknown risks• Better design- how feasible?• How do they compare with the alternatives?• (Inefficiencies are often hidden in monolithic corporations)• Need for careful evaluation of Australian experience (BTRE?)

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Getting Industry Structures Right

• Enthusiasm for separation (vertical, horizontal) waning (Ergas)

• Firm structure very important for investment• Fewer problems of inadequate/excessive investment

within integrated businesses (BTRE?)? • E. g. Airlines which own terminals build them to the

standard they need• Problem areas with the interface between different

operators e.g. rail/truck/port• How effective has separation been in promoting

competition?

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Regulation-Getting the Right Balance

• Just how much regulatory involvement?• Regulators may become deeply involved in industry structure issues

(Samuel- Toll) and investment• Sometimes it becomes very detailed- the price of achieving regulatory

objectives as set• Handling issues of inadequate capacity (SR) (e.g. coal loaders)- quite

good• Investment incentives- a key area of debate• Myopic regulators vs gaming firms• Regulatory compliance costs (Gibbins)• Use of regulation- appropriate to use access regulation as backdoor to

airport regulation, when there is a monitoring system in place?• Airport monitoring- a critical experiment• PC inquiry results will be very significant with wider implications for

transport industries

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International Constraints- Aviation

• International aviation different because other countries have a say (Findlay, Miller)

• Arrangements are not in Australia's interest (like agriculture-Truss)

• What to do? Ownership rules to pull away the supports• A “Red Book” on benefits of European Aviation liberalisation?

(BTRE?)• Australia still has a lot of policy discretion • What is in Australia’s interest (BTRE?)• Liberalisation without reciprocity? Bargaining chips? (Dixon)• Issues won’t go away- Singapore request yesterday• Direct flights to secondary destinations (Mel, Bne)?• National hub carriers not keen on direct services, others are• Liberalisation the only way of getting more direct services?

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Getting Investment Right

• New definition-Investment appraisal: developing a set of numbers to rationalise a previous government decision to spend money

• Several entities responsible – govts, regulators, private frirms• Private firms- (mainly pay for their own mistakes)• Regulators are fairly good and transparent• Major public projects a real problem- evaluation has got a lot

worse• Dud projects being pushed by governments• Rarely any CBAs, but many “evaluations” which indicate

gigantic “benefits”• Some glimmers of hope- AusLink evaluation guidelines

(DOTRS, BTRE)• Tough treasuries? (Scrafton)

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Ongoing Government Role

• International negotiations (air)• Urban congestion measures (Sayeg)• Setting regulatory frameworks• Designing contracts (PPPs)• Interstate issues (COAG)• Handling externalities • Promoting competition (but how much-Davis)• Referee of the intermodal game (Meyrick)• Granting and designing subsidies (Dale,

Thomas, Bridge)

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Information and Analysis

• Institutional reform extensive, though some areas remain (Scrafton)

• Need to make the new arrangements work better

• Information and analysis critical• Necessary, though sadly not sufficient

condition for good decisions (Winston)• Implications: Plenty of work for the BTRE (and

others) to do

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Thank You