Better Competition, Better Prices

REPORT - March 2024

List of recommendations

3.73That the Australian Government seek to better understand trends in both labour productivity and multi-factor productivity.

Enhancing the availability of firm-level and sector-level data is vital, especially considering that variations in firm productivity have a significant impact on factor allocation and overall sector-level and economy-wide productivity outcomes.

3.74That key government agencies strengthen their capacity to analyse firm-level data.

Some of this data may already be in the possession of government in collection agencies such as the Australian Taxation Office and the Australian Prudential Regulation Authority. A greater emphasis on using this data to inform policy-making would need to take account of privacy and other considerations.

3.75That an appropriate government agency gather more detailed and higher-quality data related to profits, including Earnings before Interest, Taxes, Depreciation and Amortisation (EBITDA) rates and Return on Equity (ROE).

3.76That the Australian Bureau of Statistics assemble data on the market shares of the largest firms in key sectors and report this over time.

3.77That the Government’s Business Longitudinal Analysis Data Environment (BLADE) dataset include price levels.

That the Government consider expanding third party access to the BLADE dataset.

3.78That the Australian Competition and Consumer Commission’s capacity to analyse large microdata sets be enhanced.

3.79That the Australian Competition and Consumer Commission be given oversight of market concentration powers.

4.29That the Treasurer’s Competition Policy Taskforce examine governance arrangements for the development and advancement of competition policy and institutions, including explicit consideration of whether this would best be achieved by the creation of a new institution responsible for developing competition policy or, instead, the allocation of this responsibility to an existing institution (with suitable resourcing).

4.30That the Treasurer’s Competition Policy Taskforce examine whether competitive neutrality principles require updating.

4.31That the Treasurer’s Competition Policy Taskforce examine the establishment of a single national regulator for co-operatives and mutuals.

4.65That, above a suitable threshold, pre-merger notification to the Australian Competition and Consumer Commission should be required.

4.66That the Treasurer’s Competition Policy Taskforce examine whether, above an appropriate threshold, merger transactions should be suspended from completion without Australian Competition and Consumer Commission clearance.

4.67That the Treasurer’s Competition Policy Taskforce examine the suitability of the current merger test.

4.90That the Treasurer’s Competition Policy Taskforce review the prevalence and economic impact of non-compete clauses, including whether such clauses:

are commonly used in inappropriate contexts; and

act as a constraint on people changing jobs and thereby dampen the level of dynamism within the overall labour market.

4.91That the Treasurer’s Competition Policy Taskforce should consider the appropriateness of constraints and bans on non-compete clauses and other restraint of trade clauses.

5.33That the Commonwealth Government continue to advance its better regulation agenda, in conjunction with state and territory governments and other relevant stakeholders.

5.34That the Government continue to strengthen the analysis of the impact of regulation and red tape to ensure that it is fit for purpose.

5.35That the Government consider strengthening the guidelines in relation to the development of Regulatory Impact Statements (RISs) so that they more explicitly include consideration of the impact of new measures on competition and economic dynamism.

5.36That the Government strengthen RMG-128 (regulator performance) so that:

Ministers are asked to review any Ministerial Statements of Expectations they have issued to regulators to ensure they sufficiently deal with issues relating to competition and economic dynamism.

That best practice collaboration and engagement with stakeholders should include, where appropriate, seeking advice as to whether regulatory settings optimally manage issues relating to competition and economic dynamism.

That agencies periodically review and report on the efficacy of regulatory sandboxes.

5.37That the Government consider the extension of the regulatory sandbox currently used by the Australian Securities and Investments Commission.

5.89That the Government examine the potential scope for the use of market design in areas where:

Traditional market mechanisms face challenges (e.g. price is not the best or only appropriate allocation mechanism).

This could include situations in which there are:

oMaterial supplier or consumer heterogeneity issues that limit the effectiveness of the price mechanism.

oCo-ordination issues between suppliers and/or consumers.

oThin markets.

5.90That the Government explore ways to develop and implement matching markets (or reform existing markets) where thin markets are a problem.This could include:

Creating platforms or trading mechanisms that encourage participation form a diverse range of stakeholders where such platforms or mechanisms may not arise through other means (eg due to market failure). Where platforms or mechanisms have arisen without government prompting, to consider whether regulation is appropriate.

Exploring the possibility of setting up physical or virtual marketplaces tailored to the needs of specific regions or communities.

Incentivising access for all eligible individuals, irrespective of their location or background.

Using media to contact potential participants and inform them about market opportunities.

5.91That the Government (along with market design experts), develop, undertake and evaluate a series of pilot projects to test the potential for market design to provide benefits in different areas of social service delivery. This could include:

The delivery of complex services, particularly in outer-urban or regional and rural areas.

The delivery of services that require considerable co-ordination between clients.

5.146In relation to the electronic market for homogenous goods, that the Government explore (and fund) pilots for the procurement of selected goods and services where there is potential for material gains in cost savings, quality or both.

5.147In relation to the procurement of goods or professional services, that the Government review the use of panels and whether there are ways to capture the efficiencies of infrequent firm vetting/contractual arrangements—versus arrangements that increase the scope for a wider range of firms to offer their services.

5.148That the Government explore ways it could adjust procurement processes to allow for greater participation by Small to Medium Enterprises (SMEs) and social enterprises. This could include adjusting the way panels are used to be less exclusionary to SMEs and social enterprises.

5.149That the Government explore ways packages of goods and services can be unbundled to allow for SMEs and social enterprises to effectively compete to provide the goods or services. In doing so, the Government should consider:

How to optimally manage transaction costs, allowing for the possibility that unbundling increases competitive tension in some areas of service provision.

The potential for SMEs or social enterprises to undertake parts of the work required for an overall project.

5.150That the Government develop a social enterprise accreditation scheme to facilitate its procurement of goods and services from social enterprises, drawing from the models already in operation in Victoria and Queensland.

5.171That the Government continue to develop and advance its digital strategy, particularly in areas where it can enhance client outcomes.

5.172That the Government develop a dashboard that outlines in an accessible way key performance indicators. This could be started with pilots by Services Australia and the Australian Securities and Investments Commission.

5.173That the Government actively develops greater opportunities to appropriately share or use government funded data and research, in ways that create public benefit, but also preserve privacy.

6.28That the Government develop a fit for purpose ‘regulatory grid’ to provide greater visibility and coordination of regulatory interventions across the financial services sector.

6.106That the Treasury Competition Policy Taskforce examine mechanisms to increase consumer engagement with mortgages and deposit products. Initially, this could take the form of pilots of one or more of the following:

A requirement that banks reach out to variable rate consumers with older home loans (3 or more years) once per year to review their product, prompting them to consider both price and non-price factors.

A requirement that banks should notify the base interest rate at the end of the introductory period where a retail deposit product is offered.

A requirement that banks should clearly notify retail deposit holders of changes to their interest rates, changes to the eligibility requirements for a bonus interest rate and, where practicable, alert customers when they are approaching a threshold for eligibility for a bonus interest rate (e.g. a minimum balance level).

That APRA provide an independent benchmark (or series of benchmarks) for variable rates for new/switching customers over the preceding 12 months. That this benchmark be published for use by mortgage brokers and financial advisers to improve their capacity to contact new clients to improve churn rates.

6.107That the Government examine the merits of adopting a government-backed Residential Mortgage-Backed Securities (RMBS) scheme, taking into account the characteristics, and evaluation, of the Canadian RMBS model.

6.108That the Australian Prudential Regulation Authority examine the suitability of macro prudential regulation of medium and smaller banks and, in particular, their capital holding requirements.

6.109That the Government explore cooperating with the banking sector in the development and evaluation of a pilot in relation to tracker mortgages.

6.126That the Government explore mechanisms to make the spread and fees on foreign exchange transfers more transparent for customers.

6.166That the Government explore the suitability of more flexible licensing arrangements for participants in the payments system, as part of the next review of the Government’s Strategic Plan for the Payments System (scheduled to commence by mid-2024).

7.50That the Government examine the barriers to financing at the different stages of the innovation process to identify barriers and opportunities to increase investment.

8.102That the Government explore which longer term competition policy settings can provide appropriate oversight of the airlines.

8.103That the Government consider, as part of the Aviation White Paper, strengthening consumer compensation arrangements and consider adopting measures to enhance consumer protection in aviation services, similar to other jurisdictions.

8.104That the Government examine the suitability of current ‘use it or lose it’ arrangements for airport slots.

8.105That the Government progress reforms to Sydney air traffic demand management.

10.44That the Government examine removing barriers to entry of providers of settlement and clearing services for equities, to boost competition in the sector.