Impact of Competition Policy Reforms on Rural and Regional Australia Inquiry Report
Total Page：16
File Type：pdf, Size：1020Kb
Impact of Competition Policy Reforms on Rural and Regional Australia Inquiry Report Report No. 8 8 September 1999 Commonwealth of Australia 1999 ISBN 1 74037 024 4 This work is subject to copyright. Apart from any use as permitted under the Copyright Act 1968, the work may be reproduced in whole or in part for study or training purposes, subject to the inclusion of an acknowledgment of the source. Reproduction for commercial use or sale requires prior written permission from AusInfo. Requests and inquiries concerning reproduction and rights should be addressed to the Manager, Legislative Services, AusInfo, GPO Box 1920, Canberra, ACT, 2601. Publications Inquiries: Media and Publications Productivity Commission Locked Bag 2 Collins Street East Melbourne VIC 8003 Tel: (03) 9653 2244 Fax: (03) 9653 2303 Email: [email protected] General Inquiries: Tel: (03) 9653 2100 or (02) 6240 3200 An appropriate citation for this paper is: Productivity Commission 1999, Impact of Competition Policy Reforms on Rural and Regional Australia, Report no. 8, AusInfo, Canberra. The Productivity Commission The Productivity Commission, an independent Commonwealth agency, is the Government’s principal review and advisory body on microeconomic policy and regulation. It conducts public inquiries and research into a broad range of economic and social issues affecting the welfare of Australians. The Commission’s independence is underpinned by an Act of Parliament. Its processes and outputs are open to public scrutiny and are driven by concern for the wellbeing of the community as a whole. Information on the Productivity Commission, its publications and its current work program can be found on the World Wide Web at www.pc.gov.au or by contacting Media and Publications on (03) 9653 2244. Blank Page for Letter of Transmittal Terms of reference PRODUCTIVITY COMMISSION ACT 1998 I, Peter Costello, Treasurer, under Part 3 of the Productivity Commission Act 1998, hereby refer the impact of competition policy reforms on rural and regional Australia for inquiry and report within twelve months of receipt of this reference. The Commission is to hold public hearings for the purpose of the inquiry, including in rural and regional Australia. Background The Government is proceeding with this inquiry in response to recommendations made by the House of Representatives Committee on Financial Institutions and Public Administration. The Government wishes to ensure that the benefits of increased competition in the economy flow to all Australians, including those living in rural and regional Australia, and that the implementation of competition policy promotes efficiency, economic growth and community welfare. Competition policy also recognises that there can be circumstances in which restrictions on competition may be justified where there are offsetting public benefits. Scope of inquiry The Commission’s public inquiry should assess the impact (both transitional and ongoing) of the competition policy and related reforms introduced by the Commonwealth, State, Territory and local governments under the three intergovernmental agreements signed in April 1995 — the Competition Principles Agreement, the Conduct Code Agreement and the Agreement to Implement the National Competition Policy and Related Reforms. These agreements followed an Independent Committee of Inquiry into National Competition Policy that reported to Commonwealth, State and Territory Heads of Government in August 1993 (the Hilmer Report). In undertaking the inquiry the Commission should have regard to the established economic, social, environmental, and regional development objectives of Australian governments. Consideration should be given to other influences on the evolution of markets in regional and rural Australia, including the role of international trade, foreign investment and globalisation generally. The Commission should specifically report on: (a) the impact of competition policy reforms on the structure, competitiveness and regulation of major industries and markets supplying to and supplied by regional and rural Australia; (b) the economic and social impacts on regional and rural Australia (including on small businesses and local governments) of the changes to market structure, competitiveness and regulation flowing from the reforms and the effect of these impacts and changes on the wider Australian economy; (c) possible differences between regional and metropolitan Australia in the nature and operation of major markets and in the economic and social impacts of the reforms promoted by national competition policy; and (d) any measures which should be taken to facilitate the flow of benefits (or to mitigate any transitional costs or negative impacts) arising from competition policy reforms to residents and businesses in regional and rural Australia. PETER COSTELLO [Reference received on 31 August 1998] IV TERMS OF REFERENCE Contents Terms of reference IV Contents V Disclosure of interests XIV Acknowledgments XV Abbreviations and explanations XVII Key messages XXII OVERVIEW XXIII FINDINGS XLIII 1 Introduction 1 1.1 Background to the inquiry 1 1.2 Defining rural and regional Australia 3 1.3 What is National Competition Policy? 5 1.4 Themes from country Australia 7 1.5 Structure of the report 14 PART A DEVELOPMENTS IN COUNTRY AUSTRALIA 2 Demographic changes and social indicators 17 2.1 Introduction 17 2.2 Demographic changes 18 2.3 Labour market and household income 31 2.4 Social indicators: country and city 39 3 Economic change in country Australia 47 3.1 Introduction 47 3.2 The changing nature of Australia’s economy 48 3.3 Drivers of change 60 CONTENTS V PART B THE NATIONAL COMPETITION POLICY REFORMS 4 The National Competition Policy Agreements 81 4.1 Introduction 81 4.2 Competition Principles Agreement 84 4.3 Conduct Code Agreement 90 4.4 Agreement to Implement the National Competition Policy and Related Reforms 92 5 National Competition Policy-related infrastructure reforms 97 5.1 Introduction 97 5.2 Electricity 99 5.3 Gas 118 5.4 Water 131 5.5 Road transport 159 5.6 Conclusion 168 6 Reform of public monopolies 171 6.1 Introduction 171 6.2 Progress with the reform of government monopolies 172 7 National Competition Policy and the marketing of rural products 195 7.1 Introduction 195 7.2 Application of the Trade Practices Act 198 7.3 Review of SMA legislation 199 7.4 The impacts of SMA reform under NCP 207 7.5 Managing reform at the regional level 223 8 Impact of competitive neutrality and contracting on local government 225 8.1 Introduction 225 8.2 What is competitive neutrality? 225 8.3 Commonwealth, State and Territory government approaches to competitive neutrality 227 8.4 What is competitive tendering and contracting? 229 8.5 Participants’ views on competitive neutrality 230 8.6 Competitive tendering and contracting issues 238 8.7 Impact of competitive neutrality on local government 246 VI CONTENTS 9 Other reforms 253 9.1 Introduction 253 9.2 NCP-related reforms 254 9.3 Other issues 272 10 Summary of impacts of National Competition Policy reforms 283 10.1 Introduction 283 10.2 Effects to date 284 10.3 Longer-term regional impacts of NCP reforms 294 10.4 Long-run NCP impacts in the context of broad economic forces 306 PART C IMPROVING NCP AND ACHIEVING BETTER OUTCOMES FOR COUNTRY AUSTRALIA 11 Improving the operation of National Competition policy 313 11.1 Introduction 313 11.2 Why is improved understanding of NCP important? 314 11.3 What NCP does not require 316 11.4 NCP and State and Territory governments 317 11.5 Measures to improve understanding of NCP 321 11.6 Operation of the ‘public interest’ provisions of NCP 322 11.7 Modifying NCP 332 11.8 The role of the National Competition Council 339 12 Achieving better outcomes for country Australia 343 12.1 Introduction 343 12.2 The nature of markets in country Australia 344 12.3 Community and universal service obligations 350 12.4 Provision of services to country Australia 355 12.5 Regional development 361 13 Coping with change 371 13.1 Introduction 371 13.2 Change and adjustment 372 13.3 Rationales for further adjustment assistance 377 13.4 Possible forms of specific adjustment assistance 385 13.5 Managing reform implementation 389 13.6 Concluding comments 393 CONTENTS VII APPENDIXES A Conduct of the inquiry 399 A.1 Introduction 399 A.2 List of submissions 400 A.3 Participants at public hearings 406 A.4 Locations at which meetings were held 408 A.5 Consultations and regional discussions 409 B Technical notes for decomposition analysis of population growth 423 B.1 Data 423 B.2 Results 428 C Legislation reviews and the marketing of rural products 435 C.1 Commonwealth 436 C.2 New South Wales 439 C.3 Victoria 442 C.4 Queensland 444 C.5 Western Australia 447 C.6 South Australia 449 C.7 Tasmania 450 C.8 Australian Capital Territory 451 C.9 Northern Territory 451 References 453 BOXES 1.1 Examples of government policies potentially affecting country Australia 7 3.1 Structural change indexes 56 3.2 Changes in a rural Australian community: Finch Hatton, Queensland 62 3.3 Structural adjustment — a Canadian perspective 63 3.4 The growth of tourism 65 3.5 Local impacts of mining 72 4.1 Factors taken into account as ‘public benefits’ 92 5.1 Gas deregulation in Western Australia 128 5.2 Regional benefits of the Wodonga–Wagga Wagga pipeline 129 VIII CONTENTS 5.3 Water property rights — a comparison of the New South Wales and Victorian systems for the provision of water entitlements 147 5.4 CoAG reforms and water caps — results from modelling done in the ‘Water and