National Competition Council 2004, NCC Occasional Series: Microeconomic Reform in Australia - Comparison to Other OECD Countries, Ausinfo, Canberra
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040110 NCC Allens Cover spine 25/11/04 12:22 PM Page 1 NCC Occasional Series – Microeconomic Reform in Australia. Comparison to Other OECD Countries.– Microeconomic November 2004 NCC Occasional Series Microeconomic Reform in Australia Comparison to Other OECD Countries National Competition Council Level 9/128 Exhibition Street Melbourne Vic 3000 November 2004 P: [03] 9285 7474 F: [03] 9285 7477 E: [email protected] W: http://www.ncc.gov.au © Commonwealth of Australia 2004 ISBN 0-9756705-8-1 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 acknowledgement 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. Inquiries or comments on this report should be directed to: Media and Communications Manager National Competition Council Level 9/128 Exhibition Street MELBOURNE VIC 3000 Ph: (03) 9285 7474 Fax: (03) 9285 7477 Email: [email protected] An appropriate citation for this paper is: National Competition Council 2004, NCC Occasional Series: Microeconomic Reform in Australia - Comparison to other OECD Countries, AusInfo, Canberra. The National Competition Council The National Competition Council was established on 6 November 1995 by the Competition Policy Reform Act 1995 following agreement by the Commonwealth, State and Territory governments. It is a federal statutory authority which functions as an independent advisory body for all governments on the implementation of the National Competition Policy reforms. The Council’s aim is to ‘improve the well being of all Australians through growth, innovation and rising productivity, and by promoting competition that is in the public interest’. Information on the National Competition Council, its publications and its current work program can be found on the internet at www.ncc.gov.au or by contacting NCC Communications on (03) 9285 7474. Foreword In April 2004 the Australian Government Treasurer referred to the Productivity Commission (PC) a review of National Competition Policy (NCP). The objects of the review are to identify the impacts of NCP on the Australian economy and community and to examine further opportunities for reform that will be likely to produce significant gains for Australia. Over the last ten years the National Competition Council (Council) has had a central role in promoting NCP reforms and assessing reform activity undertaken by the Federal, State and Territory Governments. As such it has a keen interest in the PC’s review. At an early stage in considering how it could contribute positively to the PC’s review, the Council sought to identify areas of research that would complement and inform the PC’s analysis. Three research topics emerged from that consideration. One sought to assist in identifying possible areas of future reform activity by sketching the range of sec- toral reforms that had been undertaken in a range of other economies. The aim of this research was to broaden the horizon against which future reform activities might be considered. The other two projects sought to undertake an ex post examination of aspects of NCP reform in the dairy- ing and grain production sectors. These were two sectors where claims of adverse results from reform were being made by some groups but where the Council was unable to find any independent or objective analy- sis to support or reject such views. In commissioning this research the Council sought to sponsor high quality analysis that would genuinely contribute to the PC’s review activity in this area. For each research area identified broad research briefs were prepared and proposals were sought from a number of experienced and professional consultancy organisations. The commissioned research was conducted between June and September 2004. This report and two others represent the output of this research activity. The reports present the analysis, judgements and conclusions of the various authors, the details of which may or may not be shared by the Council. Nevertheless the Council is very appreciative of the efforts of each consultancy in undertaking this work and of the contribution these reports can make to understanding of NCP reform activity to date and the scope for gains from similar reform going forward. These reports have been provided to the PC as part of the Council’s response to its draft report on NCP and are being published by the Council as the first three reports in an Occasional Papers series in order to further understanding of NCP and related microeconomic reform issues in Australia. David Crawford John Feil Acting President Executive Director The Allen Consulting Group Pty Ltd ACN 007 061 930 Melbourne 4th Floor, 128 Exhibition St Melbourne VIC 3000 Telephone: (61-3) 9654 3800 Facsimile: (61-3) 9654 6363 Sydney 3rd Floor, Fairfax House, 19 Pitt St Sydney NSW 2000 Telephone: (61-2) 9247 2466 Facsimile: (61-2) 9247 2455 Canberra Level 12, 15 London Circuit Canberra ACT 2600 GPO Box 418, Canberra ACT 2601 Telephone: (61-2) 6230 0185 Facsimile: (61-2) 6230 0149 Perth Level 25, 44 St Georgeʼs Tce Perth WA 6000 Telephone: (61-8) 9221 9911 Facsimile: (61-8) 9221 9922 Brisbane Level 11, 77 Eagle St Brisbane QLD 4000 PO Box 7034, Riverside Centre, Brisbane QLD 4001 Telephone: (61-7) 3221 7266 Facsimile: (61-7) 3221 7255 Online Email: [email protected] Website: www.allenconsult.com.au Suggested citation for this report: The Allen Consulting Group 2004, Microeconomic Reform in Australia: Comparison to Other OECD Countries, Sydney. Disclaimer: While The Allen Consulting Group endeavours to provide reliable analysis and believes the material it presents is accurate, it will not be liable for any claim by any party acting on such information. © The Allen Consulting Group 2004 The Allen Consulting Group i Contents Introduction v Chapter 1 2 A framework for a new microeconomic reform agenda 2 1.1 The changing reform environment 2 1.2 Characteristics of best-practice reform 4 1.3 Emerging priorities for an Australian agenda 9 Chapter 2 14 Application of competition law and competitive neutrality principles to government business activity 14 2.1 Major Australian reforms 14 2.2 Overseas reform progress 15 2.3 Key observations 19 Chapter 3 21 Energy 21 3.1 Major Australian reforms 21 3.2 Overseas reform progress 22 3.3 Key observations 26 Chapter 4 28 Transport 28 4.1 Major Australian reforms 28 4.2 Overseas reform progress 29 4.3 Key observations 33 Chapter 5 34 Professional and occupational regulation 34 5.1 Major Australian reforms 34 5.2 Overseas reform progress 35 5.3 Key observations 39 Chapter 6 40 Labour market 40 6.1 Major Australian reforms 40 6.2 Overseas reform progress 42 6.3 Key observations 45 The Allen Consulting Group ii Chapter 7 47 Capital markets 47 7.1 Major Australian reforms 47 7.2 Overseas reform progress 48 7.3 Key observations 51 Chapter 8 53 Health 53 8.1 Major Australian reforms 53 8.2 Overseas reform progress 54 8.3 Key observations 60 Chapter 9 63 Education 63 9.1 Major Australian reforms in education 63 9.2 Overseas reform progress 64 9.3 Key observations 71 Chapter 10 75 Water 75 10.1 Major Australian reforms 75 10.2 Overseas reform progress 77 10.3 Key observations 80 Chapter 11 81 Environmental regulation 81 11.1 Major Australian reforms 81 11.2 Overseas reform progress 82 11.3 Key observations 88 Chapter 12 90 Telecommunications and postal services 90 12.1 Major Australian reforms 90 12.2 Overseas reform progress 91 12.3 Key observations 96 Chapter 13 99 Significant technological and demographic changes since the Hilmer Report 99 13.1 The rise of the information economy 99 13.2 The ageing population 101 Chapter 14 104 The increasingly important concept of governance in microeconomic reform 104 14.1 Government in Australia 104 14.2 The broader concept of ‘governance’ 106 The Allen Consulting Group iii 14.3 What it means for the National Competition Policy 110 Appendix A 112 Abbreviations 112 Appendix B 113 Further reading on overseas experiences 113 B.1 Application of competition law and competitive neutrality principles to government business activity 113 B.2 Energy 113 B.3 Transport 114 B.4 Professional and occupational regulation 115 B.5 Labour market 116 B.6 Capital markets 116 B.7 Health 117 B.8 Education 118 B.9 Water 119 B.10 Environmental regulation 119 B.11 Telecommunications and postal services 120 The Allen Consulting Group iv Introduction The National Competition Council commissioned The Allen Consulting Group to examine the state of economic reform in a range of key sectors of the Australian economy against reforms in New Zealand, Canada, the United Kingdom, the United States, and the European Union. This report is structured in the following way: • Part A: Report findings — drawing on the analysis in the subsequent chapters, chapter 1 sets out a framework for a new microeconomic reform agenda; • Part B: Sectoral analysis (chapters 2 to 12) — these chapters provide an overview of reforms in Australia and overseas, and identify key observations and further sources for reading; • Part C: Cross-sectoral issues (chapters 13 and 14) — the sector-by-sector specific analysis from Part A is complemented by the analysis of a number of broader policy themes and trends in Australia and overseas; and • Part D: Appendices