Let's get more serious about competition

Australia's Financial System Inquiry, aka the Murray report, came out over the weekend: you can find overviews here or here and the thing itself here.

I was particularly taken with the bit that looked at the interplay between regulation and competition: regulation can often have positive results (such as helping with the stability of the financial system) but it can also reduce competition (for example by writing rules that make it harder for new entrants).

The Aussie report, I'm pleased to say, came squarely down on the side of competition.

First it said that

The benefits of competition are central to the Inquiry's philosophy. While competition is generally adequate in the financial system at present, the high concentration and steadily increasing vertical integration in some sectors has the potential to limit the benefits of competition in the future. Licensing provisions and regulatory frameworks can impose significant barriers to the entry and growth of new players, especially those with business models that do not fit well within existing regulatory frameworks

And its Recommendation 30 consequently says that Australia should

Review the state of competition in the [financial] sector every three years, improve reporting of how regulators balance competition against their core objectives, identify barriers to cross-border provision of financial services and include consideration of competition in the Australian Securities and Investments Commission's mandate.

The Murray report comes on the heels of earlier reports from the Aussies' Competition Policy Review (which I wrote about here, here and here) which also put competition front and centre in policymaking: all good stuff.

The recommendation that Australia should look at the state of competition in the financial sector every three years reminded me that in June our Productivity Commission came out with its report on raising productivity in  the services sector, and recommended (as I wrote here) that "The Commerce Commission should be able to undertake studies on competition in any specific market in the economy".

Six months later, nowt. As the Productivity Commission says on the services report website, "The Government is considering the Commission’s report and recommendations. No timeframe has been set for the overall response"
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You're left with the feeling that the Aussies are taking the benefits of competition rather more seriously than we are.