At the April 1995 COAG meeting, the Commonwealth, States and Territories entered into three Inter-Governmental Agreements. These are the Conduct Code Agreement, the Competition Principles Agreement and the Agreement to Implement the National Competition Policy and Related Reforms. These Agreements underpin competition reform in Australia.

Meeting the commitments embodied in these Agreements will make it easier to do business and provide lower prices to consumers by:

• removing any unfair advantages government businesses have over their private sector competitors;
• reducing levels of regulation (and costs) on business; and
• pursuing benefits for the whole community, rather than a privileged few, by enhancing competition.

A key area for policy reform has been infrastructure services: electricity, gas, water and transport. This has resulted in cheaper prices of up to 30% for electricity where businesses are able to select their own supplier in the national market; 40% cheaper prices for rail freight between Melbourne and Perth; and a possible 60% reduction in price for gas access tariffs in NSW by the year 2000.

Effective competition reform will generate greater revenue to government through the impetus provided to business and consumption (through lower costs to consumers). States and Territories that undertake these reforms are entitled to a share of this additional revenue, as National Competition Policy (NCP) Payments.

All Governments agreed to be assessed by an independent arbiter, the National Competition Council, in respect of their progress towards the agreed competition reform benchmarks. In turn, the Commonwealth has agreed to make Payments to those States and Territories assessed as making satisfactory progress.

The total amount of NCP Payments available to the States and Territories for 1998-99 is $391.3m.

The Council has recommended to me that all the States and Territories, except New South Wales, receive their full allocation of NCP Payments.

The Council’s recommendation shows that the States and Territories have overwhelmingly satisfied their first tranche obligations outlined in the Agreement to Implement the National Competition Policy and Related Reforms.

In relation to NSW, the Council has recommended that if domestic rice marketing arrangements are not reformed by 31 January 1999 — as recommended by an independent review group in 1995 — then $10m should be deducted from its remaining 1998-99 NCP Payments. This penalty reflects the costs imposed on consumers from maintaining the current domestic arrangements.

NSW’s total NCP Payment allocation for 1998-99 is $125m.

The independent review group found that there was a net public benefit to maintaining the single desk marketing arrangements for the export of rice. The Council is satisfied with this finding and the single export desk for rice is not in question.

However, in relation to domestic arrangements, the review group found there would be significant benefits to consumers if individual rice growers were free to choose to whom they sell their rice. It recommended that the compulsory acquisition (vesting) powers of the NSW Rice Marketing Board for rice sold domestically should not be renewed when they expire after 31 January 1999.

The Council continues to make every attempt to negotiate a better outcome on this issue, and is to be commended for its efforts.

A number of positive developments have occurred to date. A working group comprising representatives of the NSW Government, rice growers and the National Competition Council has been established to develop an acceptable solution to this matter — one that satisfies both rice growers and the requirements for effective competition reform to the benefit of all Australians.

With the exception of New South Wales, I have accepted the Council’s recommendations on the NCP Payments and have informed the relevant States and Territories accordingly.

I propose to delay until early 1999 any decision on whether New South Wales will have its NCP Payments reduced. This delay will allow the working party to complete its task and enable me to take the outcome into account in making my decision.

The Council is separately publishing its recommendations.

CANBERRA

21 August 1998

Contact Officers:

NCC: Ed Willett (03) 9285 7499

Treasury: Peter Greagg (02) 6263 3872