Friday, 3 March 2017

Slow, slow, slow

Reading a new biography of Paul Keating, I came across a good example of how the Aussies in recent years are pushing on with reform while we dilly dally. It's in an area close to my heart - competition policy.

The biography tells me that in Oz the National Competition Policy Review (the 'Hilmer' review) started on October 4 1992 and was published on August 25 1993: ten and a half months. It got buy-in from Australia's state premiers on February 25 1994, six months later, and essentially went live from April 11 1995. Start to finish, two and a half years. Call it three years to allow for pre-Review debate on whether to press the green button.

The latest Aussie Competition Policy Review (the 'Harper' review) was announced on December 4 2013, got underway on March 27 2014, and published its final report on March 31 2015: sixteen months. Legislation to implement its big recommendation (reform of the abuse of market power) is well underway: last month it got through the Aussies' Senate Economics Legislation Committee. There's horse trading to come, but it could well pass this year. Start to finish, call it four years.

Meanwhile, in New Zealand there's been no comparable root and branch review at all.

The best we've managed is some useful recommendations from the Productivity Commission (again featuring reform of abuse of market power) in May 2014. The government decided on a follow-up 'targeted review', and in November 2015 MBIE produced an issues paper on three issues (market power, market studies, cease and desist). The consultation and submission process wrapped up in July 2016. And then the trail goes cold. There's been no further news: it'll soon be three years since the Productivity Commission set the ball rolling, and we don't even have policy decisions, let alone laws passed.

And on another part of the battlefield, we thought we had some bright ideas to reform how we treat cartels (notably criminalising them). A bill was introduced to that effect in October 2011. Over five years later, it hasn't reached the floor of the House for a final vote, and has had the criminalisation bit dropped.

So here's the tally. Australia: two major competition reviews, one done and dusted in good time, the other well on its way. New Zealand: no decision on a limited subset of issues, and five years delay (and counting) on a hamstrung cartel bill.

Let's recall that the Hilmer review alone was worth many billions of dollars to the Aussie economy. The Aussie Productivity Commission had a go at measuring it in 2005, and found (pXII) that
National Competition Policy (NCP) has delivered substantial benefits to the Australian community which, overall, have greatly outweighed the costs. It has:
– contributed to the productivity surge that has underpinned 13 years of continuous economic growth, and associated strong growth in household incomes;
– directly reduced the prices of goods and services such as electricity and milk;
– stimulated business innovation, customer responsiveness and choice; and
– helped meet some environmental goals, including the more efficient use of water 
and (pXVII) that
Previous model-based projections by the Industry Commission suggested that the major elements of NCP could potentially generate a net benefit equivalent to 5.5 per cent of GDP. More selective analysis, undertaken for this inquiry, indicates that the observed productivity and price changes in key infrastructure sectors in the 1990s — to which NCP and related reforms have directly contributed — have increased Australia’s GDP by 2.5 per cent, or $20 billion....And such modelling does not pick up the ‘dynamic’ efficiency gains from more competitive markets 
So we've spent years navel-gazing on the fine differences between cease and desist orders and injunctions, and missed the opportunity (which the Aussies seized) to add at least 2.5% to our GDP.

Nice work, guys!

1 comment:

  1. Fully agree Donal.

    Our inertia on competition policy is shameful and is almost certain to be imposing big costs on the NZ economy in the form of high prices and poor service, not to mention lack of innovation.

    Let's be honest: competition law/policy is inherently political and this government has zero interest in reining in the top-end-of-town. The smoking gun, that clearly shows where political priorities lie, is that we've effectively had no abuse-of-dominance law for several years, because the enforcer (the Commerce Commission) is on strike, because it considers case-law to have spiked its guns to the point where more prosecutions are just a waste of time and money.

    Knowing this (as everyone in the trade does), a government that gave a toss would have done something years ago: change the law or sack the Commission. Doing nothing, as they have, sends a very clear signal to dominant firms: fill your boots, and then use them to kick around your actual and potential rivals.

    Also, for further evidence that we can be snappy if we want to, consider the Ministerial Inquiry into Telecommunications. Ordered in late 1999 (if memory serves), reported within a year, legislation passed late 2001 that created a decent regulatory regime that has (albeit with modifications along the way) allowed competition to flourish.

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