NO.068

The Government is today releasing the Report of the Productivity Commission inquiry

into the Impact of Competition Policy Reforms on Rural and Regional Australia.

The Government welcomes the Report, which provides a comprehensive analysis of the

factors behind economic and social developments in rural and regional Australia and the

effects of competition policy on the community. The Government is releasing the Report now

because it believes it will provide a valuable contribution to discussion at the Regional

Australia Summit, which is to be held on 27-29 October. The Government is making the

Report available for the Summit in order to improve community understanding of national

competition policy. A formal response to the Report’s recommendations will be made in

due course.

The Report indicates that most of the conditions affecting rural Australia are the

result of long-term factors, such as declining global commodity prices, technological

innovation and changing consumer preferences. These factors are mainly responsible for the

drift of population away from inland country areas. The Report notes that competition

policy has been wrongly blamed for some of the effects of these long-term changes in the

environment facing our rural industries.

Effective competition policy fosters the development of a competitive, flexible economy

that allows more rapid and less costly adjustment to changes in the domestic and

international environment, such as the recent Asian slowdown. Reducing the structural

rigidities in the economy and developing a competitive market environment enables

Australia to increase its level of productivity growth. Increases in productivity growth

are the best means of achieving higher real incomes and greater employment opportunities.

However, competition policy permits restrictions on competition when it is in the public

interest.

The Commission has found that rural and regional Australia has benefited from

competition policy. For example, large users of electricity in country Australia have

enjoyed significant reductions in usage charges. Real gas prices have fallen by 22 per

cent on average and the extension of the gas network has created opportunities for new and

existing businesses in rural Australia.

The Report also notes that better road access for newer technology, such as B-doubles,

and increased competition have seen productivity increase and freight rates fall. Rail

reforms have produced significant benefits, particularly for users in country Australia,

with national freight rates falling 16 per cent in real terms. Freight rates on the

Melbourne to Perth rail route have fallen by 40 per cent. Port authority charges have

declined by 23 per cent, a considerable benefit to country Australia given the

significance of mining and agricultural exports.

Country Australia has also benefited from improvements in communications. Competition

in telecommunications has seen STD prices fall by 25 per cent. The real price of posting a

letter has fallen by 9 per cent, while the number of retail postal facilities in rural and

remote Australia has increased. And more flexible retail trading hours have been of net

benefit to consumers and appear to have increased employment, including in country

Australia.

Copies of the Report are available from Government Info Shops, or may be downloaded

from the Productivity Commission website at www.pc.gov.au.

CANBERRA

14 October 1999