Toward a ‘zippier’ economy: Competition reform is on the way

Joseph Brookes
Senior Reporter

The Labor government has foreshadowed generational competition reforms for the private sector to create a “zippier” national economy that encourages workforce mobility, innovation and startup activity after a decade of sluggish productivity growth.

Competition minister Andrew Leigh said on Monday the nation “desperately needs” competition reform, and argued for interventions on the scale of the Hilmer Review and subsequent National Competition Policy reforms of the nineties.

Competition minister Andrew Leigh says reforms will make for a zippier economy.

Developed out of a review led by Professor Fred Hilmer in 1993, the reforms saw the Commonwealth pay states and territories $5.7 billion to implement changes that addressed areas like competition restricting laws and regulations, national standards, retail trading hours and opening up key markets like energy.

The changes were credited in a 2005 Productivity Commission review with adding a permanent increase of 2.5 per cent to Australia’s GDP, worth around $50 billion a year today or $5000 per household.

In an address to the University of Sydney, Mr Leigh said the problems facing the Australian economy today are different, but “just as acute” as in 1992.

“The focus of competition reform in our era should be on the private sector, where there are real concerns about Australia’s economic dynamism,” Mr Leigh said.

“Emerging trends – such as a fall in job-switching and business start-up rates just as market concentration and mark-ups increase – suggest our economy has become less competitive.

“Almost 30 years later many industries have changed beyond recognition. Digital platforms pose competition policy challenges that weren’t conceived of in the early 1990s.”

Mr Leigh, a former professor at ANU’s Research School of Economics said similar scale changes to those of the 1990s would help create a “zippier” economy that results in more “more startups, more opportunities for workers, and more choice for consumers”.

“The Australian economy today needs a good dose of competition. Compared with the 2000s, rates of startup business formation and job switching are down,” he said. “Market concentration and markups are up. Productivity growth – exceptional in the 1990s – was sluggish in the 2010s.”

He highlighted competition barriers like “problematic privatisation”, zoning laws, inefficient energy markets and housing taxes, acknowledging many are state based problems.

But he said federalism should drive reform and that competition offers an organising framework for addressing some of the biggest challenges facing households and the macroeconomy.

Mr Leigh said there are lessons to be learnt from the Hilmer reforms as well, like more consideration of vulnerable and regional communities, making changes that improve both economic dynamism and environmental sustainability, and being wary of “privatised monopolies”.

Do you know more? Contact James Riley via Email.

Leave a Comment