March 10th 2001


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Articles from this issue:

COVER STORY: Nationals: the last hurrah?

EDITORIAL: Government embraces the politics of panic

CANBERRA OBSERVED: Competition Policy the next to go?

INDONESIA: Borneo violence further weakens Wahid

NATIONAL AFFAIRS: Why refugees are a soft target

Help needed for North Queensland farmers

DRUGS: Drug policy criticised by international board

Straws in the Wind

Letter: Kim Beazley - look at the record

Senate inquiry attacks NZ apple import proposal

ECONOMICS: Trade blocs - where will Australia fit?

THE MEDIA

HUMAN RIGHTS: Amnesty Report may sink China's Olympic bid

HEALTH: Lessons of SA abortion experience

COMMENT: Paul Lyneham - Australia's H. L. Mencken

Teen books gone from "honest" to "offensive"

Letter: Refugees - coarsening of attitudes

Letter: Alice Springs - Darwin railway

Letter: One Nation

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CANBERRA OBSERVED:
Competition Policy the next to go?


by News Weekly

News Weekly, March 10, 2001
In the midst of dumping many of its vote-losing and unachievable policies overboard to save the sinking ship the Howard Government needs to take an urgent hard look at National Competition Policy and the social and economic impact it is having especially in rural and regional Australia. The policy has been a disaster for the Government and the reasons are pretty obvious.

Having won over the states and territories with a $16 billion carrot to legislate for rigorous and legally-backed competition in Australia, the Government handed all care and responsibility over to bureaucrats and unelected professional spruikers like Graeme Samuel, the president of the National Competition Council.

The Government then wears all the political flak for a policy it has no direct control over, but receives absolutely no kudos for any benefits the policy may bring.

Unnoticed

This is because the incremental efficiencies created by National Competition Policy and the slicing of a few cents off the price of a particular product or service is hardly noticed by the ordinary punter. And if it is noticed, the voter certainly does not equate it to National Competition Policy and congratulate the politicians who implemented it accordingly.

Mr Samuel's recent response to critics of the policy after the Queensland election is a case in point. Hubris is not strong enough a word to describe Mr Samuel's attitude to people who question his organisation, and a politician would be strung up if he adopted similar rhetoric.

Instead of acknowledging at least some of the alienation and discontent in the bush, Mr Samuel made the ludicrous boast in a national newspaper article that National Competition Policy had saved Australia from the Asian economic crisis.

The Asian crisis was caused by hot investment money flooding into the "Tiger" economies chasing spectacular returns. When the fund managers discovered the extent of corruption, cronyism, and the flaws in these countries' banks and public institutions they all wanted to be the first one out the door and the result was economic disaster.

Mr Samuel should know that the international investors could just as easily flee from Australia tonight, and nothing, especially not National Competition Policy, would save us.

The ordinary voter does not understand the economics of the policy Mr Samuel pushes, but he understands this completely.

The truth is National Competition Policy has delivered some benefits on a macro level - for example the national power industry which required and benefited from some initial reform. Having each state build their own isolated power systems resulted in over-production and over-capacity, and required each state to construct a spare power station to provide emergency reserve power.

The initial reforms of the power system under National Competition Policy resulted in a better exchange of electricity between New South Wales and Victoria with further flow-ons to Queensland, South Australia and eventually Tasmania. The result has been cheaper electricity production than would otherwise have been the case.

However, even this most obvious area of reform has gone too far because under the policy, only the wealthiest and most powerful customers will be able to bargain for the cheapest electricity.

While it would be foolish not to recognise some of the benefits in certain areas of the economy, in many other cases, the policy is about the destruction of the small "inefficient" operator to the benefit of the large predatory one.

Treasury's "one size fits all" approach to policy is also never taken into account, nor is the fact that businesses and communities have built up assets over decades of one government policy only to have them destroyed by an overnight change of philosophy in Canberra.

It is important to note that National Competition Policy does not and will not apply to newsagents and chemists under a Coalition Government. Why? In the case of newsagents, opening them up to competition would force the Fairfax and News Ltd newspaper empires to overhaul their whole distribution businesses cutting into profit margins. The newspaper barons have a powerful voice and their combined efforts can go a long way to unseating governments.

It would be interesting to hear what Fred Hilmer, one of the grand architects of the policy and now chairman of Fairfax, has to say about breaking up newsagents' monopolies on newspaper distribution. Similarly, the Government has protected pharmacists from the major retail chains such as Woolworths and Coles, who could easily provide much cheaper drugs and other products 24-hours-a-day which only pharmacists can legally sell.

The old arguments about consumer choice, efficiency, lower business costs are ignored when applied to competition for pharmacists. When it looked like competition policy might threaten the pharmacists, Dr Michael Wooldridge called for a report looking in to the "pros and cons" of applying such a policy to chemists. It was headed up by former pharmacist, drug company board member and senior NSW Liberal Party office holder, Mr Warwick Wilkinson.

The result of the Wilkinson Report was of course predictable, and indeed did not create so much as a ripple in Canberra except for the frustrated Treasury officials who saw it as another flaw in the magnificent level playing field tapestry they have been weaving over the past two decades. After much consideration and analysis, Mr Wilkinson basically came out in support of the pharmacists holding on to their monopolies with a few crumb concessions to the major retailers.

The simple political facts are these: pharmacists are part of the backbone of small business Australia, they are important members of every local community inside and outside their work more respected even than doctors, they are mostly Coalition voters, and finally they talk to a lot of people. Smashing their monopolies, despite the windfall gains to consumers, would be like opening up hundreds of mini campaign offices around the country which would work diligently to unseat the Government.

The point is that National Competition Policy can be flexible, there are already exceptions to the rule, and these are based on political considerations.

The Howard Government has allowed unelected officials to push ahead with a policy which has caused extraordinary social and economic dislocation across large parts of the country.

It has been grossly negligent in handing over the reigns of government to these officials, and time is running short to take them back again.March 10, 2001

URL:2001mar10_co

Author:News Weekly

Keywords:National Civic Council, News Weekly, Competition Policy, Graeme Samuel, National Competition Council, economic rationalism, regional Australia

Headline: CANBERRA OBSERVED: Competition Policy the next to go?

Text:In the midst of dumping many of its vote-losing and unachievable policies overboard to save the sinking ship the Howard Government needs to take an urgent hard look at National Competition Policy and the social and economic impact it is having especially in rural and regional Australia. The policy has been a disaster for the Government and the reasons are pretty obvious.

Having won over the states and territories with a $16 billion carrot to legislate for rigorous and legally-backed competition in Australia, the Government handed all care and responsibility over to bureaucrats and unelected professional spruikers like Graeme Samuel, the president of the National Competition Council.

The Government then wears all the political flak for a policy it has no direct control over, but receives absolutely no kudos for any benefits the policy may bring.

Unnoticed

This is because the incremental efficiencies created by National Competition Policy and the slicing of a few cents off the price of a particular product or service is hardly noticed by the ordinary punter. And if it is noticed, the voter certainly does not equate it to National Competition Policy and congratulate the politicians who implemented it accordingly.

Mr Samuel's recent response to critics of the policy after the Queensland election is a case in point. Hubris is not strong enough a word to describe Mr Samuel's attitude to people who question his organisation, and a politician would be strung up if he adopted similar rhetoric.

Instead of acknowledging at least some of the alienation and discontent in the bush, Mr Samuel made the ludicrous boast in a national newspaper article that National Competition Policy had saved Australia from the Asian economic crisis.

The Asian crisis was caused by hot investment money flooding into the "Tiger" economies chasing spectacular returns. When the fund managers discovered the extent of corruption, cronyism, and the flaws in these countries' banks and public institutions they all wanted to be the first one out the door and the result was economic disaster.

Mr Samuel should know that the international investors could just as easily flee from Australia tonight, and nothing, especially not National Competition Policy, would save us.

The ordinary voter does not understand the economics of the policy Mr Samuel pushes, but he understands this completely.

The truth is National Competition Policy has delivered some benefits on a macro level - for example the national power industry which required and benefited from some initial reform. Having each state build their own isolated power systems resulted in over-production and over-capacity, and required each state to construct a spare power station to provide emergency reserve power.

The initial reforms of the power system under National Competition Policy resulted in a better exchange of electricity between New South Wales and Victoria with further flow-ons to Queensland, South Australia and eventually Tasmania. The result has been cheaper electricity production than would otherwise have been the case.

However, even this most obvious area of reform has gone too far because under the policy, only the wealthiest and most powerful customers will be able to bargain for the cheapest electricity.

While it would be foolish not to recognise some of the benefits in certain areas of the economy, in many other cases, the policy is about the destruction of the small "inefficient" operator to the benefit of the large predatory one.

Treasury's "one size fits all" approach to policy is also never taken into account, nor is the fact that businesses and communities have built up assets over decades of one government policy only to have them destroyed by an overnight change of philosophy in Canberra.

It is important to note that National Competition Policy does not and will not apply to newsagents and chemists under a Coalition Government. Why? In the case of newsagents, opening them up to competition would force the Fairfax and News Ltd newspaper empires to overhaul their whole distribution businesses cutting into profit margins. The newspaper barons have a powerful voice and their combined efforts can go a long way to unseating governments.

It would be interesting to hear what Fred Hilmer, one of the grand architects of the policy and now chairman of Fairfax, has to say about breaking up newsagents' monopolies on newspaper distribution. Similarly, the Government has protected pharmacists from the major retail chains such as Woolworths and Coles, who could easily provide much cheaper drugs and other products 24-hours-a-day which only pharmacists can legally sell.

The old arguments about consumer choice, efficiency, lower business costs are ignored when applied to competition for pharmacists. When it looked like competition policy might threaten the pharmacists, Dr Michael Wooldridge called for a report looking in to the "pros and cons" of applying such a policy to chemists. It was headed up by former pharmacist, drug company board member and senior NSW Liberal Party office holder, Mr Warwick Wilkinson.

The result of the Wilkinson Report was of course predictable, and indeed did not create so much as a ripple in Canberra except for the frustrated Treasury officials who saw it as another flaw in the magnificent level playing field tapestry they have been weaving over the past two decades. After much consideration and analysis, Mr Wilkinson basically came out in support of the pharmacists holding on to their monopolies with a few crumb concessions to the major retailers.

The simple political facts are these: pharmacists are part of the backbone of small business Australia, they are important members of every local community inside and outside their work more respected even than doctors, they are mostly Coalition voters, and finally they talk to a lot of people. Smashing their monopolies, despite the windfall gains to consumers, would be like opening up hundreds of mini campaign offices around the country which would work diligently to unseat the Government.

The point is that National Competition Policy can be flexible, there are already exceptions to the rule, and these are based on political considerations.

The Howard Government has allowed unelected officials to push ahead with a policy which has caused extraordinary social and economic dislocation across large parts of the country.

It has been grossly negligent in handing over the reigns of government to these officials, and time is running short to take them back again.




























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