John Durie: Competition Minister raids the archives for market reform inspiration

Competition Minister Andrew Leigh will today use the 30th anniversary of the landmark Hilmer reforms to make his case for comprehensive competition reform in Australia.

He will tell a Sydney University function “the Australian economy today needs a good dose of competition”.

He will argue that more competition will spark innovation and encourage startups, creating more opportunities for workers, and more choices for consumers.

“Compared with the 2000s, rates of startup business formation and job switching are down. Market concentration and markups are up. Productivity growth — exceptional in the 1990s — was sluggish in the 2010s,” Leigh will say.

He will note analysis of the Hilmer reforms showed they resulted in “a permanent increase of 2.5% in Australia’s GDP from competition reform. Today, that lift equates to around $50 billion a year, or around $5000 per household”.

The speech comes ahead of next week’s budget which will focus on the macro economy.

It also follows Leigh’s recent initiative to table legislation for his promised reforms to increase penalties for competition law breaches and new unconscionable conduct laws which outlaw the whole contract for unreasonable terms, rather than just specific provisions.

The early-90s reforms — which include federal government incentives to state governments to implement reforms like de-regulated shopping hours and taxis — were based on a report prepared by a committee chaired by Fred Hilmer AO, ex-CEO of Fairfax and former local lead of McKinsey & Company.

Back to the future: Lessons from the Hilmer reforms

“Thirty years on, there are seven lessons from those reforms,” Leigh will say.

“Tell a big story. Deploy financial incentives for reform where possible. Solve the next problem, not the last one. Protect vulnerable communities. Promote changes that improve both economic dynamism and environmental sustainability. Beware of privatised monopolies. Use federalism to drive reform.

“Microeconomic reform requires cooperation and an alignment of incentives. Competition in Australia isn’t just a national issue — it’s a compact between states, territories and federal government.”

The Minister argues the ALP has historically been the most dynamic in driving competition reforms.

He will quote former prime minister Paul Keating saying: “We brought a new word to the Labor lexicon — competition. Competition is our word, not their word. Not the Tories’ word… we were tired of paying twice as much as we should be paying for cars, for telephones, for clothing, for electricity. By cutting tariffs and by lifting domestic competition, we created a low price structure, thereby allowing people’s wages to go further.

“If competition policy could lay the groundwork for another 1990s-type productivity surge, the result would be more innovation and more startups, more opportunities for workers, and more choice for consumers. Better use of technology, and household budgets that stretch a little further.”