NATIONAL AFFAIRS: by Patrick J. ByrneNews Weekly
Will new NCP inquiry be a whitewash?
, May 8, 2004
When the Prime Minister recently consulted with cane farmers in north Queensland, leading Burdekin farmer Max Menzel was shown on national television telling Mr Howard that National Competition Policy was "killing our rural industries."
Since then, Queensland Premier Peter Beattie has backed a resolution in the new state parliament strongly critical of National Competition Policy (NCP) and calling on the Federal government to undertake a major review of the 10-year-old policy.
His action begs the questions: will the Queensland Government heed the call of the Sugar Industry Reform Committee to place a moratorium on deregulation of the sugar industry until NCP is overhauled. Or will it keep its promise to pass legislation deregulating the sugar industry early in the new parliament?Resolution
The resolution in the Queensland parliament was moved by Independent Dolly Pratt. It conveyed the parliament's "concerns to the Prime Minister in relation to the impact of national competition policy and privatisation proposals on Queensland business and industry and the devastating effects being felt by Queensland farmers." It passed without opposition.
Paul Lucas, Labor's Minister for Transport and Main Roads, told the parliament that the Federal Government was hypocritical in forcing the states to accept deregulation of "rail, bottle shops, taxis, electricity, industrial relations, waterside workers, you name it. But when it comes to federal areas where it might be held politically accountable, such as pharmacies and newsagents, suddenly there are overwhelming arguments not to have competition."
The industries that the National Competition Council has listed to be deregulated or privatised include energy, water, health, government business, transport, primary industries, financial services, legal, planning and construction, retail, social regulation, communications, and education.
The primary industries being targeted are AgVet chemicals, bulk handling (single selling desks for wheat, barley and sugar), dairy, fisheries, food regulation, forestry, grains, horticulture, mining, potatoes, poultry, quarantine, rice, sugar, and veterinary services.
The Federal Government has been paying the states to deregulate. Currently, total payments are running at over $750m per annum.
Now the Productivity Commission, which is under the jurisdiction of Federal Treasurer Peter Costello, has announced a review of NCP, aimed at furthering ways to improve competition in the Australian economy. Mr Costello says it is to also examine the impact of NCP on rural and regional Australia.
However, two out of the three commissioners appointed to the review have a history of strongly backing free-market policies.
If the Federal Government wants to undertake a serious review, it should be done by a Federal Parliamentary committee, with a cross section of economists engaged to examine NCP's impact on both the regions and the economy as a whole.
A recent government-sponsored report provides good reason for a wide ranging review. A National Office of the Information Economy (NOIE) report seriously undermines the conventional wisdom that Australia has experienced big increases in the efficiency of many industries as a result of the NCP "micro-economic" reforms.
An important measure of efficiency is improved productivity, i.e. increased output by workers. For example, this happens if a work can increase production from 100 to 120 items a day. This can be the result of better machinery or because of improved working skills. Micro-economic reforms are said to improve skills and worker efficiency, and eliminate inefficiencies through increased competition.
The NOIE report, Productivity Growth in Australian Manufacturing,
was focusing on the contribution of computers to increased worker efficiency.
It revealed that 65 per cent to 85 per cent of the improved efficiency/productivity of Australian workers between 1984 and 2001 was due to improvements in technology, in new machines, particularly faster and cheaper computers.
What's more, most of the remaining 15 per cent to 35 per cent improvement in worker efficiency was due to a more educated workers, particularly the growing proportion of university graduates in the workforce.
In other words, there was almost no measurable increase in productivity from the deregulation of industries and other measures taken to improve competition under NCP's micro-economic reforms.
As economist John Quiggin commented in the Australian Financial Review
, "Was this, then, to be the moment of truth, when the story of the productivity miracle, driven by micro-economic reform, would finally get the kind of robust criticism it deserved? Sadly, no.
"The report begins with an executive summary, which takes pains to play down the main findings, and to pay homage to the conventional wisdom about micro-economic reform.
"Moreover, not long after the report was (very quietly) released, the NOIE was abolished and its functions absorbed by a new body, the Australian Government Information Management Office."