National Competition Policy
Encyclopedia
The term National Competition Policy refers to a set of policies introduced in Australia in the 1990s with the aim of promoting microeconomic reform
.
and the application of the principles of competition policy. The Committee was chaired by Professor Fred Hilmer
and also comprised Mr Geoffrey Tapperall and Mr Mark Rayner.
The report was commissioned against a backdrop of major microeconomic reforms led by the Keating Government, but slow progress on areas of the economy sheltered from competition as a result of constitutional limits on the application of the Federal Trade Practices Act or of other actions by Federal or state governments. The report thus had important implications for state-owned enterprises, many of which had begun entering into commercial activities; the professions, which were excluded from the application of Federal law; certain agricultural marketing entities granted monopoly rights; and certain infrastructure entities.
The report was prepared through a consultation process that included public solicitation of submissions, public meetings, and extensive discussions with State governments. The Committee presented its report, commonly referred to as the 'Hilmer Report', in 1993. The principal recommendations were:
– to bring all commercial activity in Australia within the purview of the Trade Practices Act, regardless of legal form or ownership of the enterprise, thus putting to an end anomalies arising from the division of constitutional authority between Federal and State Governments;
– to establish a new regulatory regime to prevent enterprises that controlled an "essential facility" with natural monopoly characteristics from abusing their market power. The new "access regime" was to be part of an expanded Trade Practices Act.
– to establish a set of principles which all Australian Governments should adopt, the most important of which were: (a)legislative or regulatory impediments to competition should be subject to review to ensure the costs associated with reduced competition were exceeded by public benefits; (b) before engaging in commercial activity, state-owned entities should be subject to "competitive neutrality" requirements to address distortions to competition arising from their various policy privileges.
– to reform the organisational arrangements competition policy in Australia, by expanding the role of the Trade Practices Commission (to be re-named Australian Competition and Consumer Commission) establish a Competition Policy Council to advise on issues arising the inter-governmental arrangements.
The report was hailed as a major breakthrough in microeconomic reform, and its recommendations were endorsed in their entirety by Federal and State governments. The recommended changes to the Trade Practice Act were implemented quickly, and the report was also used as the basis of the Competition Principles Agreement reached at the 1995 meeting of the Council of Australian Governments
(COAG). The term 'Hilmer reforms' is now used to refer to processes arising from the intergovernmental Competition Principles Agreement and the associated Competition Policy Reform Act 1995 (Cwlth).
The objective of competitive neutrality policy is the elimination of resource allocation distortions arising out of the public ownership of entities engaged in significant business activities: Government businesses should not enjoy any net competitive advantage simply as a result of their public sector ownership. These principles only apply to the business activities of publicly owned entities, not to the non-business non-profit activities of these entities.
Other areas of National Competition Policy require structural reform of public monopolies
and require owners of monopoly facilities to negotiate third-party access
agreements with other users.
2
's One Nation party in the 1998 Queensland election.
Microeconomic reform
The term microeconomic reform refers to policies directed to achieve improvements in economic efficiency, either by eliminating or reducing distortions in individual sectors of the economy or by reforming economy-wide policies such as tax policy and competition policy with an emphasis on economic...
.
Origins
In 1992, an independent committee of inquiry, the National Competition Policy Review Committee, was established by Prime Minister Keating to inquire into and advise on appropriate changes to legislation and other measures in relation to the scope of the Trade Practices Act 1974Trade Practices Act 1974
The Competition and Consumer Act 2010 is an act of the Parliament of Australia. On 1 January 2011 the Trade Practices Act 1974 was renamed the Competition and Consumer Act 2010. The act provides for protection of consumers and prevents some restrictive trade practices of companies. It is the key...
and the application of the principles of competition policy. The Committee was chaired by Professor Fred Hilmer
Fred Hilmer
Professor Frederick George Hilmer AO is an Australian academic and business figure.Professor Hilmer obtained from the University of Sydney the degree of Bachelor of Laws with Honours Class II in April 1966....
and also comprised Mr Geoffrey Tapperall and Mr Mark Rayner.
The report was commissioned against a backdrop of major microeconomic reforms led by the Keating Government, but slow progress on areas of the economy sheltered from competition as a result of constitutional limits on the application of the Federal Trade Practices Act or of other actions by Federal or state governments. The report thus had important implications for state-owned enterprises, many of which had begun entering into commercial activities; the professions, which were excluded from the application of Federal law; certain agricultural marketing entities granted monopoly rights; and certain infrastructure entities.
The report was prepared through a consultation process that included public solicitation of submissions, public meetings, and extensive discussions with State governments. The Committee presented its report, commonly referred to as the 'Hilmer Report', in 1993. The principal recommendations were:
– to bring all commercial activity in Australia within the purview of the Trade Practices Act, regardless of legal form or ownership of the enterprise, thus putting to an end anomalies arising from the division of constitutional authority between Federal and State Governments;
– to establish a new regulatory regime to prevent enterprises that controlled an "essential facility" with natural monopoly characteristics from abusing their market power. The new "access regime" was to be part of an expanded Trade Practices Act.
– to establish a set of principles which all Australian Governments should adopt, the most important of which were: (a)legislative or regulatory impediments to competition should be subject to review to ensure the costs associated with reduced competition were exceeded by public benefits; (b) before engaging in commercial activity, state-owned entities should be subject to "competitive neutrality" requirements to address distortions to competition arising from their various policy privileges.
– to reform the organisational arrangements competition policy in Australia, by expanding the role of the Trade Practices Commission (to be re-named Australian Competition and Consumer Commission) establish a Competition Policy Council to advise on issues arising the inter-governmental arrangements.
The report was hailed as a major breakthrough in microeconomic reform, and its recommendations were endorsed in their entirety by Federal and State governments. The recommended changes to the Trade Practice Act were implemented quickly, and the report was also used as the basis of the Competition Principles Agreement reached at the 1995 meeting of the Council of Australian Governments
Council of Australian Governments
The Council of Australian Governments is an organisation consisting of the federal government, the governments of the six states and two mainland territories and the Australian Local Government Association. It was established in May 1992 after agreement by the then Prime Minister, Premiers and...
(COAG). The term 'Hilmer reforms' is now used to refer to processes arising from the intergovernmental Competition Principles Agreement and the associated Competition Policy Reform Act 1995 (Cwlth).
Key provisions
The stated objective of National Competition Policy, as it applies to the public sector, is to achieve the most efficient provision of publicly provided goods and services through reforms designed to minimise restrictions on competition and promote competitive neutrality. The principal reform required under the policy is the application of a public benefit test to justify the maintenance of any public policy which prima facie restricts competition. Policies for which a public benefit cannot be demonstrated must be repealed or modified so that they do not reduce competition.The objective of competitive neutrality policy is the elimination of resource allocation distortions arising out of the public ownership of entities engaged in significant business activities: Government businesses should not enjoy any net competitive advantage simply as a result of their public sector ownership. These principles only apply to the business activities of publicly owned entities, not to the non-business non-profit activities of these entities.
Other areas of National Competition Policy require structural reform of public monopolies
Monopoly
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...
and require owners of monopoly facilities to negotiate third-party access
Third-party access
Third party access policies require owners of natural monopoly infrastructure facilities to grant access to those facilities to parties other than their own customers, usually competitors in the provision of the relevant services, on commercial terms comparable to those that would apply in a...
agreements with other users.
2
Benefits
Studies undertaken by the Australian Productivity Commission showed that the Hilmer reforms had a substantial impact on productivity growth, helping to underpin the strong period of economic growth Australia enjoyed in the 1990s and early 2000s.Controversy
While the report itself involved a public consultation process, the relatively rapid pace of implementation of the report's recommendations compressed opportunities for public education and debate. This was exploited by some groups, and the impact and motivation of the reforms were often mischaracterized. This contributed to a hostile public reaction in some circles, particularly evident in support for Pauline HansonPauline Hanson
Pauline Lee Hanson is an Australian politician and former leader of Pauline Hanson's One Nation, a political party with a populist and anti-multiculturalism platform...
's One Nation party in the 1998 Queensland election.