The current policy

Right from the start, in 1995 the Australian Democrats told the Labor and Coalition parties that they were playing with fire in introducing the NCP in the manner they did. Regrettably we have been proven right, and the electoral uproar from rural and regional Australia and small business in particular, have shaken this Government to the core. The Democrats have listened to the unhappy cries from those in regional and rural Australia that have resulted from the implemen-tation of this government's (and the former government's) NCP.

NCP was drafted at the height of economic rationalist ideology, as a one size fits all methodology designed to impose competitive pressure on everything from the utilization of water to the marketing of eggs and distribution of electricity. At the heart of its approach was a 'big is beautiful and the small are expendable' philosophy.

An extensive Senate inquiry conducted during 1999 clearly showed that the benefits of NCP largely accrue to medium and large business and those residing in metropolitan areas. Those in small business and those in the regions have felt the burden. The Committee found:

At the individual level, the costs are often immediate and easily identified, while the benefits are long term, less easily defined, and do not always go to the party bearing the costs.

The Democrats agree that in theory competition should result in an efficient allocation of scarce resources and should result in consumers paying lower prices for commodities. The problem with the implementation of NCP has been the under-recognition of the costs of implementation of the policy. The focus has been almost solely on the economic pricing consequences, with too little attention paid to the economic structural effects (small business) and to social and environmental impacts. That has its own costs, which have at times exceeded the supposed economic benefits.

Assessing the policy

The Senate Committee also commented:

The Committee found a clear need for a proper quantification of the benefits and costs of the policy – social, environmental and economic. The lack of data for benchmarks or performance criteria for evaluation of the policy is one of the greatest shortcomings of the implementation of NCP.

The Australian Democrats would ensure that for the purposes of assessing the implications of a competition policy and its outcomes, a method of assessment be agreed by the Council of Australian Governments (CoAG) which would provide a numerical weighting that can be attributed to small business, environmental, social and employment factors.

The public interest test - social and environmental impacts

NCP includes a public interest test but in the view of the Australian Democrats it has been construed extremely narrowly and has been under-utilised.

The Senate Committee found that the public interest test was dominated by economic assessment, ahead of the harder to measure intangible attributes in the social and environmental areas.

It is relatively easy for economists to estimate the economic impacts of the deregulation of one industry or the instigation of competition in another. It is a much more difficult task to attribute a value to the social and environmental impacts of those sorts of changes. But the conduct of such an assessment is essential if the real costs and benefits of the implementation of a policy are to be known.

The NCP has paid too little heed to externalities. Full costing requires the larger social and environmental costs to be factored in and, in the case of small business particularly, the larger economic costs to be factored in. Instead the NCP focuses on net costs. As an example, there are pollution and social costs in using brown coal in energy generation in preference to other fuels that exceed the net cost of the brown coal itself. Or as another example, in deregulating pharmacies so that big business takes over the sector, with the loss of those small business networks and skills.

'Public interest' is an all-encompassing term that must not just refer to dollars. The Democrats would review the implementation of the policy to give full weight to the need for an assessment of all the relevant factors.

Going forward

The National Competition Council (NCC) has pursued its agenda since 1995 largely without government supervision. The reform agenda has moved on and exposed some significant adjustment issues that governments need to address by reviewing and altering the NCC's work program. No such review or adjustment has occurred.

The NCC should be abolished. If the Government won't do that it needs at least a radical overhaul of its structure, methodology and ideology.

That Australian Democrats advocate that CoAG should urgently revisit all aspects of NCP to properly assess whether its economic and social objectives are being met and to examine its environmental impacts. The revised policy should be subject to ongoing monitoring by CoAG.

The Democrats would ensure that the reviews of legislation and assessments of public interest are as open and transparent as possible.