Peter Costello

NO.068

PRODUCTIVITY COMMISSION REPORT: IMPACT OF COMPETITION POLICY REFORMS ON RURAL AND REGIONAL AUSTRALIA

The Government is today releasing the Report of the Productivity Commission inquiry into the Impact of Competition Policy Reforms on Rural and Regional Australia.

The Government welcomes the Report, which provides a comprehensive analysis of the factors behind economic and social developments in rural and regional Australia and the effects of competition policy on the community. The Government is releasing the Report now because it believes it will provide a valuable contribution to discussion at the Regional Australia Summit, which is to be held on 27-29 October. The Government is making the Report available for the Summit in order to improve community understanding of national competition policy. A formal response to the Report’s recommendations will be made in due course.

The Report indicates that most of the conditions affecting rural Australia are the result of long-term factors, such as declining global commodity prices, technological innovation and changing consumer preferences. These factors are mainly responsible for the drift of population away from inland country areas. The Report notes that competition policy has been wrongly blamed for some of the effects of these long-term changes in the environment facing our rural industries.

Effective competition policy fosters the development of a competitive, flexible economy that allows more rapid and less costly adjustment to changes in the domestic and international environment, such as the recent Asian slowdown. Reducing the structural rigidities in the economy and developing a competitive market environment enables Australia to increase its level of productivity growth. Increases in productivity growth are the best means of achieving higher real incomes and greater employment opportunities. However, competition policy permits restrictions on competition when it is in the public interest.

The Commission has found that rural and regional Australia has benefited from competition policy. For example, large users of electricity in country Australia have enjoyed significant reductions in usage charges. Real gas prices have fallen by 22 per cent on average and the extension of the gas network has created opportunities for new and existing businesses in rural Australia.

The Report also notes that better road access for newer technology, such as B-doubles, and increased competition have seen productivity increase and freight rates fall. Rail reforms have produced significant benefits, particularly for users in country Australia, with national freight rates falling 16 per cent in real terms. Freight rates on the Melbourne to Perth rail route have fallen by 40 per cent. Port authority charges have declined by 23 per cent, a considerable benefit to country Australia given the significance of mining and agricultural exports.

Country Australia has also benefited from improvements in communications. Competition in telecommunications has seen STD prices fall by 25 per cent. The real price of posting a letter has fallen by 9 per cent, while the number of retail postal facilities in rural and remote Australia has increased. And more flexible retail trading hours have been of net benefit to consumers and appear to have increased employment, including in country Australia.

Copies of the Report are available from Government Info Shops, or may be downloaded from the Productivity Commission website at www.pc.gov.au.

CANBERRA
14 October 1999