A battleground is already forming over the Harper Report recommendations, especially the suggestion to change the misuse of market power prohibition and bring in an “effects test”.
But this debate is missing what is important about the Harper Review. At a time when economic conditions are deteriorating and both federal and state governments are facing narrowing funding options, there is a pressing need to look beyond piecemeal issues and focus on whether the review will help make a tangible difference to our economic prosperity.
Last year’s G20 Communiqué held in Brisbane acknowledged the close link between competition and prosperity:
Competition is central to the operation of markets. Efficient and well-functioning markets are essential for catalysing private sector investment, ensuring an efficient allocation of resources and lifting economic growth. Fostering competition is critical for our economies. … Productivity is increased by stronger competition because a strong competition framework generates the incentives to attract the most efficient firms into markets.
If our objective is to use the Harper recommendations to drive innovation, efficiency and consumer choice, there are bigger issues on which to focus community debate.
To achieve the outcomes Australia committed to in its G20 Comprehensive Growth Plan, we need a concerted effort on competition policy reform to “raise Australia’s economic growth potential, create one million new jobs over the next five years … and support continued improvements in national living standards”.
Our attention should be focused therefore be on the areas the Harper Review has identified as not serving our long-term interests. Improving health and education delivery, reforming retail planning and zoning rules, and removing unnecessary barriers to consumer choice, are just a few areas in which competition policy can deliver substantial and enduring benefit to the entire Australian community.
Of course, as Harper has already acknowledged,there has already been quite a deal of work and some achievements in these areas.
While not easy to reform, the likely gains will be significant. Furthermore, while there remains a need for varying degrees of regulation, it should not unnecessarily stifle competition, choice and innovation.
The Panel recommends that all Australian governments commit to a set of principles common to competition policy reforms, such as promoting consumer choice and their long-term interests, and committing to the separation of public monopolies. Such principles might seem self-evident, but are worth repeating given the increasingly complex challenges facing governments intent on economic or social reform.
Human services - health, education and community services – has not been an area at the forefront of competition policy reform. It is unfinished business following the transformational Hilmer reforms of the 1990s.
The Panel reintroduces some big difficult challenges. While acknowledging innovations in delivery, it echoes Productivity Commission views that even a small improvement in efficiency in the sector would make a large difference in the quality and quantity of services and in the level of government outlays.
The ultimate recommendation – that each Australian government should adopt choice and competition principles in delivery of human services - is underwhelming, but in carefully describing the advances made, the present challenges and the way other countries have tackled this issue, the report shines a light on this important area. It is a shame the Panel did not think it could venture further in this area than to recommend trials and pilot schemes.
Acknowledging prior reports from the National Competition Council, the Australian Competition and Consumer Commission (ACCC) and the Productivity Commission, the Panel issues a direct challenge for COAG – that within two years each government should implement reforms ensuring planning and zoning laws do not unnecessarily restrict competition.
There has been enough study of this issue - it is time for action. As the Productivity Commission reported last year, most state and territory governments have conducted major reviews in recent years, but change has been slow and patchy. An earlier study for NSW concluded that comprehensive planning and zoning reform could net benefits of up to $1.4 billion per annum for the state.
Overall, the Panel has produced a comprehensive critique of the competition policy issues Australia will need to address if we are to improve consumer welfare through economic efficiency and better consumer choice. Focusing on the issues most likely to pay the highest dividends for consumer and government efficiency is a sufficient enough challenge. Let’s not get distracted by debates over the narrower issues the report also canvasses.
Reports do not, of themselves, deliver change, but they can be a powerful catalyst if embraced and promoted. Unfortunately, recent experience suggests that worthwhile reports are often dispatched to the dust bin.
That occurs more often than not if there is no strong community, business or cross-party political will to debate, adopt and implement recommendations. Implementing the Harper recommendations, whatever their final form may be, will not be easy. Federal and state governments will need to put differences aside and deal with entrenched interests if positive outcomes are to result.
Opinion leaders within the community will need to debate those recommendations that provide the biggest gains, rather than focus on areas of legal drafting that might be emotive but are unlikely to contribute much to our national competitiveness or productivity.