Thursday 26 November 2015

Good progress by the Aussies

Sometimes you have to admire the Aussies.

First they had the gumption to realise that competitive markets are part of the answer to an economy working better, and to do something about it. As their Federal Treasurer Scott Morrison said this week, "Competition policy is one of the surest ways to lift long-term productivity growth and generate economic benefits that can be shared by everyone". And they set up a competition policy review - the 'Harper' review- that delivered good results in short order with modest resources. Now, this week, the Aussie government has said it's going to run with the majority of the Harper recommendations - 44 out of the 56 - and has 'an open mind on' or has 'noted' the rest of them. Nothing's been rejected out of hand, or at least that's the official line, though I suspect the odd one here or there will be quietly left to expire. There's an item-by-item list of responses here.

It's not the most important of the Harper recommendations, but I was particularly interested in how they would react to the one on allowing 'market studies', proactive inquiries into the state of competition in markets. As I posted this week, I think this is an open and shut case: they're an obviously useful - maybe even necessary - part of the competition toolkit. The Aussies have come to the same conclusion. It's not entirely clear (to me at least) whether the Aussies will be running market studies solely through the ACCC (which the response to Recommendation 45 suggests) or whether they will also be done by a new body, the Harper-recommended Australian Council for Competition Policy, which will shepherd the general competition reform agenda. Either way, market studies are a goer. We don't (I reckon) have the scale to set up an entirely new body ourselves, but the sooner we get to the commonsense position of the Commerce Commission doing market studies in New Zealand, the better off we'll be.

Many of these agreed recommendations have the potential to make important improvements to Australian productivity. The big ones include getting more choice and competition into social services; making sure that regulation doesn't unnecessarily restrain competition (taxis/Uber look like getting dealt to, as well as mandatory product standards); ensuring that local authorities' zoning and planning doesn't have anticompetitive outcomes; and improving and simplifying competition law ("a prohibition on concerted practices, refining exclusionary conduct provisions, simplifying cartel laws, streamlining merger clearances, introducing a class authorisation process and establishing more flexible collective bargaining provisions"). And there's a long tail of smaller good ideas which will cumulatively add to the positive impact.

Not all of them are signed, sealed and delivered. A lot of the recommendations will still have to be worked through with the Australian states. And some of the more difficult ones have been kicked for touch - pharmacy reform, second-hand car imports, and, especially, reform of s46 of the Aussie competition law, the equivalent of our s36 of the Commerce Act, which deals with the abuse of market power. It hasn't gone dead - "the Government will consult further on options to reform the provision and release a discussion paper on this topic" - but there's clearly a major political bunfight on the way between Big and Small Business, complicated by political flak (the Aussie Labor Party isn't behind the Harper s46 approach). Here's a good article from the Sydney Morning Herald that gives a feel for who's backing what.

Even so, it's obvious that over the next wee while Australia will be building up quite a head of competition reform momentum. And it puts our limited exercise - the recent 'Targeted review of the Commerce Act' - in the tuppenny ha'penny place by comparison. We've already got a bit of an issue in trying to close the productivity gap with Australia: we're going to have to do a lot more in the competition arena if the Aussies aren't going to pull even further ahead.

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