Inquiry into aspects of the National Competition Policy Reform Package

NATIONAL COMPETITION POLICY AND THE PROFESSIONS

DAVID HAWKER, MP, CHAIRMAN
SPEECH FOR THE LAUNCH OF THE PUBLICATION NATIONAL COMPETITION POLICY AND THE PROFESSIONS.

PREPARED BY AUSTRALIAN COUNCIL OF THE PROFESSIONS, INSTITUTION OF ENGINEERS AUSTRALIA, AUSTRALIAN VETERINARY ASSOCIATION, ROYAL AUSTRALIAN INSTITUTE OF ARCHITECTS AND AUSTRALIAN PHYSIOTHERAPHY ASSOCIATION.

17 NOVEMBER,
CANBERRA.

I am pleased to be here today to launch the new publication on Competition policy and the professions prepared by several major professional associations.

Competition policy is a very pervasive policy that impacts on the lives of all Australians, including the professions.

The significant benefits arising from competition reforms have been recognised by all levels of government, and all major political parties.

The expected benefits for ordinary Australians are: price reductions, lower inflation, more growth, more jobs, and uniform protection of consumer and business rights across the whole country.

More specifically the Industry Commission has estimated that the long run annual gain in real GDP is of the order of 5.5%, or $23 billion a year, as a result of the cumulative effect of the Hilmer and related reforms.

While in general, introducing competition will deliver benefits to consumers and businesses, there are situations where community welfare is judged better served by not effecting particular competition reforms.

Thus in the implementation of the reforms spelt out in the Competition Principles Agreement, governments have recognised the importance of the concept of a weighing up process of costs and benefits to the community. Competition is to be implemented to the extent that the benefits to be realised from competition outweigh the costs.

A central tenet of competition reform is that competition is not an end unto itself. I can't stress that point too strongly.

The process of weighing up the costs and benefits to the community is called the 'public interest test'.

That test is a pivotal element of competition policy.

While it is generally accepted that the ultimate decisions on the weighing up of the costs and benefits are basically political ones, to be justified by the Parliament and in the final analysis by electors, it is critical that the public be involved in that process.

In June this year my Committee tabled in Parliament its report Cultivating competition which has been very well received.

I am delighted to see the report's recommendations included as an appendix to your publication.

The Committee's report outlined the results of the Committee's inquiry into several aspects of the National Competition Policy reform package. One critical area of reform which the report addressed was the appropriate means for applying the 'public interest test' as set out in the Competition Principles Agreement.

'Public interest test'

'Public interest' matters in other areas of competition policy (such as under the Trade Practices Act which are also relevant to the professions) were not within the scope of the Committee's investigation.

However, in a sense the whole process of competition policy reform is a 'public interest' one. In making decisions on competition policy reform, Governments are acting in the broad public interest as they see it.

The circumstances in which the public interest test is called for, and some of the factors that need to be taken into account in making that decision, are set out in subclause 1(3) of the Competition Principles Agreement.

As you are all aware Subclause 1(3) can be applied in a number of circumstances, but the main area where its is relevant to the professions is through the legislative review process, whereby legislation relating to the professions is to be reviewed to assess and balance the costs and benefits of the restriction on competition.

In our report the Committee outlined its interpretation of the 'public interest test' and we concluded that there should be some consistency of approach throughout jurisdictions. Accordingly, we outlined what we see are the basic principles that should guide the application of the test in all jurisdictions.

I will turn now to how governments are going about reviewing existing legislation and outline those basic principles which the Committee believes should guide the application of the test in all jurisdictions.

The Committee's comments were largely directed to government, but in your involvement in the review of legislation relating to the professions, I urge you to take our comments on board.

Legislative review timetable

We all know that under the Competition Principles Agreement the Commonwealth, States and Territories were obligated to develop a timetable, by June 1996, for the review, and where appropriate, reform of all existing legislation that restricts competition by the year 2000.

That is an enormous task, with some 2000 pieces of legislation being listed for review, including important legislation related to the professions.

When the Committee looked at the timetables earlier this year it found:

• some of those documents incorporate methodology for undertaking the reviews, others do not
• it also found some parties also prepared additional guidelines on the application of the 'public interest test'
• we found some of the policy statement point to areas where joint reviews might be undertaken
• and we found, few national reviews had been initiated. It is evident that there is potential for national reviews in any of the registered professions and occupations such as dentists, pharmacists, newsagents and optometrists.

The Committee believes there are manifest advantages in their being national reviews of legislation that restricts competition in the several jurisdictions, rather than diverse separate reviews. Accordingly, we urged all governments, possibly through the Council of Australian Governments, to work towards that end.

Public interest process

Evidence to the Committee and the government policy statements and associated documentation pointed to a number of significant factors that should be included in the 'public interest test' process.

Most of the issues raised, and ultimately the process itself, are simply good commonsense. However, from the evidence available it is clear that there is still room for improvement in how the 'public interest test' is to be applied and that processes and procedures are still being developed.

In undertaking its task the Committee believed that a framework process that provides consistency of approach through the various jurisdictions would assist the public.

As previously highlighted, essentially, the ultimate decision as to the weighing up of the merits and costs and benefits is one to be made by the relevant government. While the process may involve the government receiving assistance or advice from some outside body, it is the individual government which takes responsibility for the decision and who must answer for it. This fact will colour how the whole process is structured in each jurisdiction and will inevitably mean that there will be differences, which are sometimes substantial, in how each of the parties deal with the issues.

The major principles jurisdictions should follow in the process are transparency, objectivity, analytical rigour and achieving a balance of input from relevant and interested parties.

The Committee alluded to the apparent lack of coordination in the preparation of the legislation review statements. The same comment can be made about the processes that apply generally to the application of the 'public interest test'. Some consistency of approach through all jurisdictions would obviously be of benefit to those who have to deal with similar issues in more than one part of Australia. This does not mean that everything need be exactly the same, but at least all the issues set out by the Committee should be common, and to achieve this will require more coordination than has been evident to date.

The Committee recommended fourteen necessary components of the 'public interest' process, including the issues just outlined and matters such as the use of both quantitative and qualitative data and the procedures for the review or a reconsideration of the process. I suggest those who are interested follow these recommendations up in the back of your publication.

Related matters

In its report my Committee also addressed a number of related competition policy matters, the most important being:

• the impact of the policy on the efficient delivery and funding of community service obligations
• the implications of competition policy for the efficient delivery of services by local government
• the performance of the National Competition Council
• the arrangements for the Competition Payments to State and Territory Governments
• the need for effective public education and consultation, and gave the Committee's overall assessment on how competition policy is progressing.

In conclusion, I stress the importance of the public education process in implementing competition policy reforms. The community needs to know what the reforms are, and what the expected outcomes are likely to be. Without this, support and understanding of the process will not develop and the momentum for the policy may be lost. Public education must begin early while the areas for reform are being assessed and introduced. The community needs to be involved with competition reform as it evolves. Your publication is a critical part of progressing that public education.

I encourage you in your legislative reviews of your profession, where appropriate, to engage the public in the process early.

Conclusion

I now have pleasure in launching the publication National competition policy and the professions prepared jointly by the Australian Council of Professions, the Institution of Engineers, the Australian Veterinary Association, the Royal Australian Institute of Architects and the Australian Physiotherapy Association.

I know it will be an important document in raising awareness and assist in guiding the process as your own professions come to grips with relevant aspects of the Competition Policy Reform Act.

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