Competition Policy Needs a Global Wake-up Call

04 July 2014

“The Australian Government’s review of competition policy needs to support Australia’s adjustment to a globally competitive economy,” the Chair of the Business Council of Australia’s Competition Policy Review Working Group Danny Gilbert said.

“Australia’s remarkable 22 years of economic growth owes a lot to reforms that opened the Australian economy to greater competition following the Hilmer review in the early 1990s,” Mr Gilbert, BCA Member and Managing Partner of Gilbert + Tobin, said.

“This review can continue in that tradition by extending competition into sectors that have traditionally been provided by the public sector, by removing anti-competitive regulations and by improving the efficiency of competition law.

“Reforms in these areas should be designed to benefit consumers over the long term and also lift Australia’s international competitiveness in a world in which markets are increasingly global and technology is changing our economy and empowering consumer choices.

“Competition provides a strong incentive for businesses to improve quality, reduce costs and innovate to meet the needs of consumers and grow consumer welfare. Getting competition policies right and administering them well are critical to high-performing Australian businesses and a high-performing Australian economy.

“Ultimately, the purpose of competition policy and regulation is to serve the long-term interests of consumers, but it’s how you go about it that determines how businesses can best innovate and be productive to meet the needs of consumers.

The BCA has today released its submission to the government’s review of competition policy. The review is taking place at a time when Australia’s competitiveness is slipping:

  • more sectors of the economy are being subjected to global competition
  • we have dropped out of the world’s top 20 most competitive countries for the first time
  • our multifactor productivity has declined for seven of the past nine years.

Further, our terms of trade has fallen by 18 per cent since September 2011, reinforcing the need to lift productivity to grow national income in the future.

“This review needs to be seen as a key part of the adjustment process for Australia to transition beyond the commodity price boom and maintain our living standards in a competitive global economy,” Mr Gilbert said.

This, along with other government reforms, provides an opportunity to shake off our complacency about our global competitive position.

“Competition is an inherent feature of a healthy society because competitive, profitable businesses create jobs and generate community wealth over the long term.

“This provides a sound revenue base, which enables government to play its role in meeting the needs of all Australians where government services are essential, including addressing disadvantage.

“Ultimately, this review must acknowledge what is required to remain competitive in a global market.

“The potential economic benefits will be achieved by opening more of our economy to competition through microeconomic reform and removing anti-competitive regulation, not by making the regulators more powerful or tightening the Competition and Consumer Act,” he said.

The Business Council’s submission has outlined the many challenges faced by government in formulating competition and regulatory policy. The submission calls on the review panel to make recommendations to governments that set Australia up to be more competitive by reinvigorating efforts to unleash the market economy with more purposeful market design. This will require:

  • A competition policy framework that reflects a global mindset, recognises the new competitive landscape in which Australian businesses are operating, and the impact of technology on consumer choice and access to markets, and amends the Competition and Consumer Act accordingly.
  • Broader pro-competitive reforms that make regulatory design and approvals processes more efficient, extend competition into public sector markets and improve government service provision in the long-term interests of consumers.
  • Improving the efficiency and effectiveness of competition law in some areas, including improving the formal merger process, amending or repealing provisions covering predatory pricing, price signalling and some per se prohibitions; and making the national access regime more efficient.
  • Improving the focus and scope of Australia’s regulatory institutions by considering a separate national pricing and access regulator and introducing clearer accountabilities for regulators.
  • Establishing new institutions to drive the ongoing reduction of regulatory barriers to competition across the federation.

“Australia has become a high-cost and low-productivity economy, and this review provides an opportunity for competition policy to do its share of the heavy lifting in addressing this structural challenge,” Mr Gilbert said.

“The key to remaining competitive with a high-cost economy is to reduce the burden of regulations which are preventing businesses from succeeding and growing in what is a tough global market.

“The challenge is for Australia’s competition and regulatory policy settings to keep up with this changing environment.

“We believe that all Australian governments need to adopt a more global perspective to competition policy and laws and to the regulation-making process.

“In too many cases the approach taken by governments is defined by a domestic mindset. This is a challenge also facing our regulators, who need to step up to the realities of the global market.

“The submission calls for the regulators to be bound by a new performance and accountability code, which is very much about ensuring competition policies and laws are administered in a way in which our global competitiveness is maintained while also protecting the long-term interests of consumers.

“This includes greater transparency and accountability controls to ensure more timely and fact-based investigations.

“Australia has many strengths which can be the basis for a new prosperity in the years ahead, but these strengths will be unleashed or held back in large part by our regulatory environment and the policies that support or hinder innovation, competition and productivity.

“This review is the opportunity to unlock a new phase of growth for Australia but it will only be achieved if it is conducted with a truly global mindset and an acknowledgement that our national destiny in being competitive or not in this new global reality is in our own hands,” Mr Gilbert said.

Submission to the Competition Policy Review


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