FROM INDUSTRY ASSISTANCE TO PRODUCTIVITY: 30 YEARS OF ‘THE COMMISSION’ © Commonwealth of Australia 2003 ISBN 1 74037 139 9 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 acknowledg- ment of the source. Reproduction for commercial use or sale requires prior written permission from the Department of Communications, IT and the Arts. Requests and inquiries concerning reproduction and rights should be addressed to the Commonwealth Copyright Administration, Intellectual Property Branch, Department of Communications, IT and the Arts, GPO Box 2154, Canberra ACT 2601. This publication is available in hard copy or PDF format from the Productivity Commission website at www.pc.gov.au. If you require part or all of this publica- tion in a different format, please contact Media and Publications (see below). 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 2003, From industry assistance to productivity: 30 years of ‘the Commission’, Productivity Commission, Canberra. Cover Design: Imagine Graphics Bert Kelly: Photo by Jennie Niccol courtesy The Centre for Independent Studies. Alf Rattigan: Photo courtesy of the Rattigan family. Foreword It is 30 years since the Industries Assistance Commission, the first predecessor of the Productivity Commission, was created by Act of Parliament. To mark that milestone, it seemed appropriate to provide an account of the institution’s activities over those three decades. For an organisation to write its own history can be fraught, especially if, like this one, it has undergone several transformations and generated considerable controversy along the way. Our purpose, however, has been a modest one: to provide a brief ‘document of record’, eschewing historical interpretation (enticing though it may be). Disentangling the two is not always easy, of course, and we may not always have succeeded. Indeed, looking back from the vantage point of the Australian economy today, it is hard not to conclude that the efforts of the Commission, often against the grain of political or public opinion, have been worthwhile — and that the willingness of successive governments to sustain such an institution has been vindicated. The effectiveness of any institution is determined not only by its mandate and structure, but also by its people. This history is therefore also a tribute to the many people, at all levels, who have contributed to the organisation’s work over the years. And it reflects our appreciation of the role played by many people outside the organisation — in government, business, community groups and the media — who have participated actively in the Commission’s processes and thereby helped ensure the integrity of its findings and policy advice. Gary Banks Chairman Productivity Commission December 2003 FROM INDUSTRY ASSISTANCE TO PRODUCTIVITY: III 30 YEARS OF ‘THE COMMISSION’ Acknowledgments This paper was principally written by Margo Hone, under the guidance of Jonathan Pincus. It also contains contributions from various others within the Productivity Commission, including some who had worked for more than one of its predecessor organisations. Comments on an earlier draft from Professor Brian Galligan of the University of Melbourne and Graham Blinman, a former long-serving member of staff, are gratefully acknowledged. The Commission’s library staff also provided valuable assistance. FROM INDUSTRY ASSISTANCE TO PRODUCTIVITY: V 30 YEARS OF ‘THE COMMISSION’ Contents Preliminaries Foreword III Acknowledgments V Abbreviations XII Chapters 1 Introduction 1 A widening remit 2 A strong analytical tradition 4 Independent Commissioners and skilled staff 5 A quick guide 6 2 Deep roots: the Tariff Board 9 The Tariff Board’s traditional approach 9 A need for change 10 Political resistance to an ‘economic and efficient’ approach 11 The Whitlam Government and the Crawford Report 15 Birth of the IAC 16 3 The Industries Assistance Commission: the 1970s 21 Role and functions of the new Commission 21 Rise (and fall) of resourcing 25 Changing portfolios 26 The IAC’s approach 28 Coverage and focus of inquiries 29 Economic downturn and policy reversal 33 A change of government 37 The ‘adjustment problem’ 39 New reporting rules 41 An uneven balance sheet 42 FROM INDUSTRY ASSISTANCE TO PRODUCTIVITY: VII 30 YEARS OF ‘THE COMMISSION’ CONTENTS 4 The Industries Assistance Commission: the 1980s 45 Reporting in a recession 45 Enter the Hawke Government 46 The Uhrig Review 47 Towards broader reforms 52 A shift to the Treasury portfolio and ‘industry plans’ 53 General tariff cuts again 57 The push for ‘microeconomic reform’ 58 Changing international trade relations 62 More restructuring 63 5 The Industry Commission 67 The first merger 67 Directions for change 72 A second round of tariff cuts 73 Reforms to reduce business costs 75 Social and environmental issues 80 6 Forming the Productivity Commission 87 The Coalition’s plans for a Productivity Commission 87 The administrative merger 89 Business as usual 91 A rough passage through Parliament 93 7 The Productivity Commission 99 Building on strong foundations 99 A new work program 104 A ‘flexible’ institution 106 An ongoing role 122 VIII FROM INDUSTRY ASSISTANCE TO PRODUCTIVITY: 30 YEARS OF ‘THE COMMISSION’ CONTENTS Appendixes A Legislation and regulation 127 B Chairmen, Commissioners and senior staff 136 C Portfolio responsibility 145 D Inquiry reports 148 E History of assistance to two sectors: the textiles, clothing 167 and footwear, and automotive industries References Boxes 2.1 The Vernon Report 11 2.2 The protection debate and the Tariff Board 12 2.3 Gough Whitlam and John Stone reflect on the 25 per cent 15 tariff cut 2.4 Sir John Crawford’s proposal for a commission to advise 17 on assistance to industries 3.1 What’s in a name? 22 3.2 IMPACT and quantitative modelling 23 3.3 Portfolio responsibility: passing the parcel 27 3.4 The Tariff Review 30 3.5 Themes from IAC annual reports: the 1970s 32 3.6 Analytical tools used by the IAC and its successors 33 3.7 The perils of ‘temporary’ assistance 35 3.8 Resource cuts at the IAC in the 1970s 38 4.1 Approaches to general reductions in protection 45 4.2 The Uhrig Review of the IAC 48 4.3 The IAC’s diminishing role in anti-dumping 50 4.4 Inquiry on government (non-tax) charges 54 4.5 Disparities in assistance matter for welfare 55 4.6 The May 1988 Economic Statement 57 FROM INDUSTRY ASSISTANCE TO PRODUCTIVITY: IX 30 YEARS OF ‘THE COMMISSION’ CONTENTS 4.7 Themes from IAC annual reports: the 1980s 61 5.1 The Inter-State Commission and the Business Regulation 68 Review Unit 5.2 The Office of Regulation Review 69 5.3 Themes from Industry Commission annual reports 75 5.4 National Competition Policy 77 5.5 Quantifying the impact of Hilmer reforms 79 5.6 Performance indicators for social infrastructure 80 5.7 Impediments to regional adjustment: the Industry 82 Commission’s first foray into industrial relations 6.1 The Bureau of Industry Economics and the Economic 88 Planning Advisory Commission 7.1 The gambling report wins over some critics 100 7.2 Ensuring research adds value 101 7.3 Themes from Productivity Commission annual reports 107 7.4 The social costs and benefits of the gambling industries 109 7.5 Overcoming Indigenous disadvantage 111 7.6 Research on the conservation of biodiversity 112 7.7 Principles for policy formulation on structural adjustment 113 7.8 One more inquiry into automotive assistance 114 7.9 Adjustment issues are integral to TCF policy formulation 115 7.10 Productivity: the mainspring of living standards 116 7.11 The gains from trade liberalisation 119 7.12 The broadcasting inquiry 120 7.13 The Commonwealth Competitive Neutrality 121 Complaints Office X FROM INDUSTRY ASSISTANCE TO PRODUCTIVITY: 30 YEARS OF ‘THE COMMISSION’ CONTENTS Figures 3.1 Staff levels: Tariff Board to Productivity Commission 24 3.2 Annual appropriations: Tariff Board to 25 Productivity Commission 3.3 IAC structure, 1974 24 4.1 Dispersion in effective assistance for manufacturing industries 55 4.2 Falling average effective rates of assistance to 56 manufacturing and agriculture 4.3 Average effective rates of assistance to TCF, PMV and 56 manufacturing 5.1 Industry Commission structure, 1995 70 6.1 Interim Commission structure, 1997 89 7.1 Productivity Commission performance framework 105 Tables 3.1 Sectoral (and other) coverage of inquiry reports 29 6.1 Staff movements during the merger 90 FROM INDUSTRY ASSISTANCE TO PRODUCTIVITY: XI 30 YEARS OF ‘THE COMMISSION’ Abbreviations ABS Australian Bureau of Statistics ABARE Australian Bureau of Agricultural and Resource Economics APEC Asia Pacific Economic Cooperation BACA Department of Business and Consumer Affairs BIE Bureau of Industry Economics BRRU Business Regulation Review Unit CCNCO Commonwealth Competitive Neutrality Complaints Office COAG Council of Australian Governments EPAC Economic Planning Advisory Commission GATT General Agreement on Tariffs and Trade GBE government business enterprise IAC Industries Assistance Commission IC Industry Commission ISC Inter-State Commission NCP National Competition Policy OECD Organisation for Economic Cooperation and Development ORR Office of Regulation Review PC Productivity Commission PMV passenger motor vehicle RIS Regulation Impact Statement SAA Special Advisory Authority TAA Temporary Assistance Authority TCF textiles, clothing and footwear XII FROM INDUSTRY ASSISTANCE TO PRODUCTIVITY: 30 YEARS OF ‘THE COMMISSION’ 1 INTRODUCTION 1 Introduction The Productivity Commission has played a key role in policy development and reform since its formation in 1998. But its roots go much deeper. It is the lineal descendant of the Industry Commission and, before that, the Industries Assistance Commission (IAC), which was established 30 years ago.