Government to review competition policy settings

Treasury will undertake a review of the competition policy settings to ensure they are fit for purpose for some of the big shifts taking place in Australia’s economy including digitisation, the growth in services and the net zero transformation.

The review will look at competition laws, policies and institutions to ensure they remain fit for purpose, with a focus on reforms that would increase productivity, reduce the cost of living and boost wages, said Treasurer Jim Chalmers.

It will consider proposals put forward by the ACCC around merger reform as well as other competition law issues.

It will also look at options for coordinated reform with states and territories, to be progressed through the Council on Federal Financial Relations.

The review will also examine non-compete and related clauses that restrict workers from shifting to a better-paying job and provide advice on competition issues raised by new technologies, the net zero transformation and growth in the care economy.

A competition taskforce has been established in Treasury to conduct the review, which will be progressed over two years and involve targeted public consultation. It will provide continuous advice rather than a formal report, so progress can be made over time.

The taskforce will be supported by an expert panel with members including the CEO of the Grattan Institute, Danielle Wood, and former chair of the ACCC, Rod Sims.

Treasurer Jim Chalmers said greater competition is critical for lifting dynamism, productivity and wage growth, putting downward pressure on prices and delivering more choice for Australians dealing with cost-of-living pressures.

“Australia’s productivity growth has slowed over the past decade, and reduced competition has contributed to this – with evidence of increased market concentration, a rise in markups and a reduction in dynamism across many parts of the economy,” said Dr Chalmers in a recent statement.

“We need to ensure our competition policy settings are fit for purpose in the face of the big shifts underway in our economy, so we can make the most of digitalisation, the growth in services, the net zero transformation, while supporting our nation’s most vulnerable.”

The importance of competition for strong labour market outcomes will be further explored in the forthcoming Employment White Paper.

Dr Chalmers said the review builds on the Albanese government’s existing efforts to boost competition, including reforms to the payments system and Australia’s financial market infrastructure.

“The Albanese government is focused on tackling cost of living pressures now and laying the foundations for future growth – and making our economy more competitive is critical to both of these goals,” he said.

The Treasurer said the release of the intergenerational report today would help identify some of the forces influencing the economy and how best to lay the foundations for broader long-term success.

The latest intergenerational report will put a more productive economy at the front and centre of what Australia needs to do in the decades ahead, he said.

“To prosper in the coming years, we need to make our economy more productive, not by making people work harder and longer for less, but by combining the things that we know will deliver productivity growth in the coming decades: economic dynamism and resilience, a role for data and digital, a more skilled and adaptable workforce, focus on the care economy and the services sector, and also the vast industrial opportunities that come from our pursuit of net zero and becoming a clean energy superpower,” he stated.

Assistant Minister for Competition, Charities and Treasury, Dr Andrew Leigh said Australia has had a rise in market concentration in the past couple of decades as well as an increase between cost and prices.

“We’ve seen a fall in the share of Australians that switch jobs and get the benefits in higher earnings that come from moving to a new job. We’ve seen a decline too in the startup rate, as measured by the number of employing small businesses that start up each year as a share of the total business sector. All of this suggests the Australian economy may have become less dynamic,” said Dr Leigh.

“That indeed may be a reason why, as Jim just pointed out, the last decade was the lousiest decade of productivity growth that we’ve mentioned in the post-war era.”

Dr Leigh said competition reforms implemented off the back of the Hilmer Report in 1993 helped spur a strong decade of productivity growth during the 1990s – and delivered a permanent 2.5 per cent increase in Australian incomes.

“We understand that when there’s not enough competition, it’s the most vulnerable who suffer,” he said.

“The most disadvantaged who may not have a car to drive to another suburb for a better deal. If you’ve got a dodgy internet connection, it may be hard to shop around. And so, in ensuring that we have a more productive economy, we’re also looking after some of the most vulnerable in Australia.

“We’re looking after workers too because increasing evidence on monopsony power suggests that increased power in firms can hurt workers. More competition is good for consumers, good for workers, good for farmers, good for small businesses, and good for Australia.”