Post on 01-Jan-2016
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Rod Sims, Chairman of the Australian Competition and Consumer
CommissionThe Mexico Forum 2013
Wednesday 9 January
• Competition essentially drives productivity
• Competition best way simultaneously to drive growth and reduce income inequality
• Productivity drives national differences in GDP per capita
• Especially when pro competition reform reduces entrenched market power
1. Extend competition to all sectors
2. Strengthen and widen the reach of competition regulation
1. The changes that were made, the role of the National Competition Policy
2. The benefits from these reforms3. Why and how these reforms were
achieved 4. The lessons learnt, some of which I
hope will be useful to you
AUSTRALIA’S RELATIVE DECLINEPer capita GDP (PPP) ranking in OECD
Australia ranked 14th in 1983
Australia ranked 4th in 1950
TOTAL FACTOR PRODUCTIVITY GROWTH, 1980 - 1990%, average annual rate, OECD countries
Australia with poor productivity performance
OECD weighted average
MAJOR NATIONAL COMPETITION POLICY ELEMENTS Policy Element Example 1. Limiting anti-competitive conduct of firms Competition conduct rules
2. Reforming regulations which unjustifiably restrict competition
Deregulation of egg marketing
3. Reforming the structure of public monopolies to facilitate competition
Restructuring of energy utilities
4. Providing third-party access to certain facilities that are essential for competition
Access arrangements for the telecommunications network
5. Restraining monopoly pricing behaviour Prices surveillance
6. Fostering “competitive neutrality” between government & private business
Requirements for government businesses to make tax-equivalent payments
EXAMPLE OF INFRASTRUCTURE CHANGESFROM TO LATE 1980S LATE 1990S (USUALLY)TelecommunicationsGovernment owned Telcom fully vertically integrated, essentially no competition
Pro-competition access regime plus auction of new licences creates many fixed line and mobile competitors
ElectricityEach State owns a vertically integrated monopoly that faces no competition
Many electricity generation companies/retailers compete nationally across an interconnected east coast grid
GasTrading only within State boarders, many barriers to trade
Interstate free gas trade; third party access regime to gas pipelines.
Rail FreightEach State has own rail freight monopoly, which is vertically integrated, and is loss making
Two privately owned competitors operating nationally formed out of previous State entities with separate rail track company
Road FreightDifferent rules means trucks often cannot cross State boarders
National road freight rules and user charging, a national road freight market.
AviationSeparate publically owned domestic and international airlines, the latter strongly protected from competition
Qantas privately owned and flying domestically and internationally in an “open skies” environment
Rural WaterNon tradable virtually free water entitlements create static water usage, particularly to low value activities
World leading water trading regime that separates water property rights from land title and allows temporary and permanent trading
Urban WaterNon cost reflective pricing; in some cases no usage based charges
Largely cost reflective pricing; many cross subsides removed
EXAMPLES OF OTHER REFORMS 1. Deregulation of retail
trading hours6. Removed restrictions on
health professionals
2. Reduced controls on liquor licensing
7. Free up grain export marketing
3. Reduced business licensing ‘red tape’
8. End price and supply restrictions on eggs and poultry
4. Streamlined development assessment processes
9. Remove dairy price and supply controls
5. Removed restrictions on the legal profession
10. Phase out non transferable fishery management licences
1. The changes that were made, the role of the National Competition Policy
2. The benefits from these reforms3. Why and how these reforms were
achieved 4. The lessons learnt, some of which I
hope will be useful to you
FORECAST GROWTH AND REVENUE BENEFITS FROM NCP CHANGES
1995 $
GROWTH Real GDP 5.5% $23 billion pa Real consumption $9 billion pa $1,500 per household Real wages 3% increase Employment 30,000 more jobs
REVENUE Commonwealth $5.9 billion States; Territories, local government State
$3.0 billion
CONTRIBUTION TO GDP GROWTHPercentage points
Total 2.5% increase GDP
INCREASE IN REAL INCOMES FROM NCP REFORMS
% change, 1989-90 to 1999-00
Household Income
EXAMPLE SPECIFIC SECTORAL GAINS
• Electricity prices fall 19% from early 1990s to 2004
• Some coal rail freight rates fall 42% in second half 1990s
• Average telecoms charges fall by 29% for business and 17% for households from 1996-2003
TOTAL FACTOR PRODUCTIVITY GROWTH, 1990-2000 VS. 1980-1990
Percentage Points, difference between average annual growth
OECD weighted average
Strong Australian
performance
REAL GDP GROWTH, AUSTRALIA VS OECDPercentage Points, difference between average annual growth
The National Competition Policy comes into effect
AUSTRALIA’S RELATIVE DECLINE AND RESURGENCEPer capita GDP (PPP) ranking in OECD
Australia ranked 4th in 1950
Australia ranked 14th
in 1983
Australia back to 5th in 2008
1. The changes that were made, the role of the National Competition Policy
2. The benefits from these reforms3. Why and how these reforms were
achieved 4. The lessons learnt, some of which I
hope will be useful to you
Prior to the NCP reforms Australia had experienced a decades-long debate over tariff reform
The Australian economy was performing poorly; challenges set by Treasurer and Prime Minister
With removal of the tariff wall, Australian industries were exposed to international competition, and had to adapt so demanded lower input cost structure
The public had the gains quantified by the respected Industry Commission
There was strong political leadership
The formation of the Council of Australian Governments (COAG) brought together Australia’s Prime Minister and all State and Territory leaders to drive reform
While the main work was usually undertaken by industry experts, central agency people were closely involved
COAG created a new institution, the National Competition Council (NCC), as an independent body to assess the progress of all governments on implementing their agreed reforms
To encourage reform, the Federal Government established National Competition Payments
Formation of ACCC
1. The changes that were made, the role of the National Competition Policy
2. The benefits from these reforms3. Why and how these reforms were
achieved 4. The lessons learnt, some of which I
hope will be useful to you
Ten lessons1.Prepare the ground well
before proceeding with reform
6. Provide generous financial assistance and/or incentives
2. Pursue reform on a board front
7. Get industry structures right
3. Formulate a well structured agenda that is not cluttered
8. Avoid seeking “national champions”
4. Bring high level political drive and constant attention
9. Privatise for competition and efficiency, not for maximum sale proceeds
5. Set a considered, not a frenetic pace
10. Remember that deregulation does not mean no regulation
“ In the life of a country, six years is a short period, but 2191 days are enough for laying the foundations for what now must be our goal: to make Mexico a prosperous country, with new opportunities and greater welfare for all ”