NO.023

PRODUCTIVITY COMMISSION INQUIRY INTO NATIONAL COMPETITION POLICY

ARRANGEMENTS

The Australian Government has asked the Productivity Commission to inquire

into the impact of competition policy reforms undertaken by Australian governments

to date, and to identify areas of opportunity for significant gain through further

competition reform.

In 1995, all Australian governments signed agreements to implement a range

of competition reforms under the National Competition Policy (NCP) framework

in an effort to boost the Australian economy. There has been substantial progress

in implementing NCP and other competition related reforms. This has delivered

significant benefits to Australia. The States and Territories have shared in

these gains, including through competition payments made by the Australian Government.

The Council of Australian Governments has undertaken to review NCP arrangements

by September 2005. The Australian Government considers that, before such a review

takes place, it would be beneficial to have an independent, in-depth analysis

of the success of competition related reforms, and to explore ways of increasing

the gains from such reform going forward. The inquiry will inform the review

of where gains can be made in Australia’s international competitiveness,

in the efficiency of domestic markets and for Australian consumers, of ways

to ensure possible reform activity considers appropriately the adjustment and

distributional implications, and also its contribution to achieving other policy

goals.

The Government emphasises that the purpose of this inquiry is to inform, not

substitute, the Council of Australian Governments review.

It is not unusual for the Productivity Commission to be looking into NCP issues.

It conducted an Inquiry into the Impact of Competition Policy Reforms on Rural

and Regional Australia that reported in 1999. It has also played a significant

role in the conduct of NCP reviews of individual industry sectors. This experience

should enhance the Productivity Commission’s consideration of the current

issues.

The Productivity Commission has been asked to report back to the Government

within nine months. A copy of the terms of reference is attached.

People wishing to obtain further information on the inquiry or register their

interest can do so by visiting the Productivity Commission’s website at:

www.pc.gov.au or by contacting

the Commission directly on (02) 6240 3239.

CANBERRA

23 April 2004

Contact: David Alexander (02) 6277 7340

National Competition Policy Arrangements

PRODUCTIVITY COMMISSION ACT 1998

I, PETER COSTELLO, Treasurer, pursuant to Parts 2 and 3 of the Productivity

Commission Act1998, hereby refer the following inquiry to the Commission

for inquiry and report within nine months of receipt of this reference. The

Commission is to hold hearings for the purpose of the inquiry.

Background

1. In 1995 the Australian, State and Territory governments agreed to a program

of competition policy reform. National Competition Policy (NCP) and related

reforms provide a timely, coordinated and comprehensive approach to reform across

all levels of government. There has been substantial progress in the implementation

of NCP over the past eight years, including in the related

reform areas of electricity, gas, road transport and water. This has delivered

significant benefits to Australia. The States and Territories have shared in

these gains, including through competition payments made by the Australian Government.

2. In November 2000, the Council of Australian Governments (CoAG) agreed to

a further review of NCP arrangements by September 2005.

3. It is therefore timely to undertake an independent review of these arrangements

to consider the extent of the benefits the reform program has delivered to date

and to inform an assessment of the most worthwhile competition related reforms

that could be achieved in the future, including competition related reforms

which could apply beyond current NCP arrangements.

Scope of Inquiry

4. The Commission is to report on:

(a) the impact of NCP and related reforms undertaken to date by Australian,

State and Territory Governments on the Australian economy and the Australian

community more broadly. To the extent possible, such assessment is to include:

i) impacts on significant economic indicators such as growth and productivity,

and to include significant distributional impacts, including on rural and

regional Australia; and

ii) its contribution to achieving other policy goals.

(b) at the Australian, State and Territory level, areas offering opportunities

for significant gains to the Australian economy from removing impediments to

efficiency and enhancing competition, including through a possible further legislation

review and reform programme, together with the scope and expected impact of

these competition related reforms.

Considerations

5. In conducting this review, and in recommending changes, the Commission should

take into account the desire of the Government:

(a) to focus new review and reform activity on areas where there is clear evidence

of significant potential gains, in particular where clear gains are possible

in Australia’s international competitiveness, in the efficiency of domestic

markets or for Australian consumers; to ensure possible reform activity considers

appropriately the adjustment and distributional implications and its contribution

to achieving other policy goals.

(b) to take into account but not replicate significant current and recent review

activity in areas such as the CoAG work on energy and water and the review of

the competition provisions of the Trade Practices Act.

6. In undertaking the review, the Commission is to advertise nationally inviting

submissions, hold public hearings, consult with relevant Australian Government,

State and Territory agencies and other key interest groups and affected parties,

and produce a report.

7. The Government will consider the Commission’s recommendations, and

the Government’s response will be announced as soon as possible after

the receipt of the Commission’s report. The report

will inform the CoAG review due to be completed by September 2005.

PETER COSTELLO