1. Unbinding the debate
I acknowledge the Gadigal people of the Eora Nation, the Traditional Custodians of the land on which we meet. I pay my respects to Elders past and present, and extend that respect to all First Nations people here today.
Anne and Gerard Henderson, thank you for having me back for a fourth time to speak at the Sydney Institute – an institution with an abiding belief in the competition of ideas.
Let me start with 3 stories.
A laundromat manager in a small regional town was made redundant. Instead of just receiving a thank‑you and a payout, she was given a letter claiming she had an ‘implied’ restraint. For a year, she was told, she couldn’t work in the same industry. She had never agreed to such a clause. Yet the threat hung over her: take another laundry job in town, and you could end up in court.
A health worker on less than $80,000 read his contract and saw a restraint with no end date at all. ‘Indefinite’, it said. And the scope? Not just his neighbourhood, but all of Australia and New Zealand. His employer might as well have written: ‘You can work anywhere in the world, as long as it’s not here’.
Then there was the graduate engineer, starting out on $63,000. His contract barred him from working for any competitor, anywhere in Victoria, for 12 months. For a young worker at the beginning of his career, it felt less like a career ladder, more like a trapdoor.
These aren’t the contracts of CEOs plotting corporate takeovers. They’re the contracts of ordinary Australians: people trying to pay the bills, build a career, or use the skills they’ve worked hard to earn. Instead, they find themselves shackled by clauses that say: ‘Don’t even think about moving’.
Non‑compete clauses used to be rare. Now, they’re spreading like mould in a bathroom, showing up where they don’t belong, and doing damage along the way. They stifle wages, block mobility, and bottle up ideas. For workers, they punish initiative. For the economy, they act like sand in the gears.
That’s why Treasurer Jim Chalmers announced in this year’s Budget that from 2027, we’re getting rid of non‑competes for workers earning under the Fair Work Act’s high‑income threshold: $183,100 in 2025–26. We’ll also outlaw wage‑fixing and no‑poach agreements, which quietly turn labour markets into cosy cartels.
Because good reform means listening as well as legislating, Treasury ran a consultation over the winter. Submissions closed just last week. Many made the point that non‑competes are holding Australians back.
Tonight, I want to take you through the case for change. I’ll start with the stories and the statistics about what non‑competes do to workers and to the wider economy. Then I’ll talk about the government’s reform; how we’re reshaping the rules to give Australians back their freedom to move. Finally, I’ll place this in the broader picture: our competition reform agenda, and how it can help us build a fairer, more dynamic economy.
2. Unbinding workers
At their core, non‑compete clauses are handcuffs on mobility. They tell workers: ‘Yes, you can resign, but don’t think about immediately taking your skills to a competitor, or starting up on your own.’ It’s like your favourite show ending on a cliffhanger, and the next season isn’t out for months. Only here the stakes aren’t about plot twists, but your pay cheque.
For workers, the costs of non‑competes are obvious. People get stuck in jobs they’ve outgrown. They forgo pay rises because the alternative is unemployment. They shelve their skills and start again in a different field. And as I’ll shortly outline, the research shows it hits workers’ wallets hard.
For the economy, the effects are just as damaging. When workers can’t move, ideas don’t spread. New firms don’t start. Innovation slows down. Non‑competes are like a ‘Do Not Disturb’ sign hanging over the whole economy. They might protect a complacent manager, but they hold back the country.
The harm isn’t just theoretical. Over recent years, employees have shared examples of contracts that would make your head spin. It’s hard to imagine a better way of killing off aspiration than telling someone they can’t use their own skills without a lawyer’s permission.
So non‑competes don’t just hurt individuals. They’re a drag on wages, on dynamism, and on growth. They’re also a classic case of a private contract creating a public problem.
3. Unbinding voices
One of the striking things about the Treasury consultation which has just wrapped up was just how ordinary the shackled workers were – and how extreme the restraints. These are not people with share options and corner suites. They are people folding clothes, providing care and answering phones. Non‑competes are showing up in sectors where there is no trade secret to protect. They are not about safeguarding sensitive information. They are about scaring people away from moving.
Employees shared story after story of contracts written with such sweeping restrictions you would think they were drafted for Cold War spies, not everyday workers. We saw restraints that lasted years and geographic limits that stretched not just across suburbs, but across states. Clauses so broad they could have been copied and pasted from one employer to the next. Which, judging by their clumsy wording, is probably exactly what happened.
One particular problem raised in the consultation was the use of so‑called cascading clauses. These are contracts that set out not one restraint, but half a dozen. They might say the restriction lasts 10 years or 5 years or 2 years or one year. They might cover all of Australia or a single state or a city or a 5‑kilometre radius around the workplace. The idea is that even if the longest or broadest version is struck down, some smaller version will survive. Lawyers call it the ‘blue pencil’ doctrine, because judges can cross out words until a clause looks more reasonable.
But from the point of view of a worker reading their contract, the message is unmistakable: you are boxed in. Faced with a clause that looks like it was drafted with a dartboard, most people simply will not risk moving at all. The uncertainty is the point. And that uncertainty is corrosive. It keeps people in jobs they would otherwise leave, and stops growing firms from hiring the talent they need.
And it works. Time and again, employees said the same thing: even if they suspected the clause was unenforceable, they were not willing to risk a lawsuit to test it. For most workers, the threat of legal action is enough to close off options. In that sense, non‑competes are a lawyer’s dream and a worker’s nightmare.
The harm done by non‑competes can be broader than just for the affected workers. When a nurse is discouraged from changing employers, patients lose out too. Continuity of care suffers, waiting lists grow longer and shortages in aged care and disability services become even more acute. Non‑competes that block nurses from moving jobs are effectively restraints on patients as well.
Or take another example. Australia is in the midst of an energy transition, with an urgent need for skilled electrical workers to move rapidly to the projects where their expertise is most required. Non‑competes that tell electricians they cannot take up work with a new employer slow down the very projects that are meant to get us to net zero. They turn a private contract into a roadblock for the whole country.
And pharmacists, too, have been caught in contracts that prohibit them from working within a few kilometres of their former employer for up to 2 years. In regional towns, that is the difference between staying employed and leaving the community altogether. For patients, it means fewer local options to fill prescriptions or seek advice: a competition problem that quickly becomes a health problem.
So the message from the consultation could not have been clearer. Non‑competes are no longer rare, limited or reasonable. They are widespread, heavy‑handed and harmful, not only for individual workers, but for the public services and national priorities that rely on them.
4. Unbinding the facts
The submissions gave us stories. Alongside this, surveys and economic research shows just how widespread non‑competes have become and what they mean for the economy.
In Australia, non‑competes are no longer unusual. Surveys show that around 1 in 5 employees, more than 3 million people, are bound by them. An ABS survey of employers found that usage was especially high in finance (40 per cent) and rental and real estate services (33 per cent). Larger businesses are about twice as likely as small ones to rely on them. The survey found businesses that used non‑competes applied them to more than three‑quarters of their workforce. It also suggested that the usage of non‑compete clauses has risen over time.
An e61 survey of employees shows that non‑competes are present across industries and occupations, including yoga instructors, cleaners and gig workers. Non‑competes are now common in workplaces that once would never have dreamed of using them.
To understand the damage done by non‑competes, it’s useful to start with mobility. Job mobility is one of the clearest signs of a healthy labour market. Economists use it as a gauge of dynamism, like run metres gained tells you how a rugby league team is making the most of every opportunity. Analysis by the e61 Institute shows that job switching delivers a typical wage boost of around $5,700 a year, and for younger workers the gains are closer to $7,500. Even for those who stay put, outside options improve bargaining power. When workers move, ideas move too, helping new firms spread innovation across the economy.
As you might expect, non‑competes reduce job mobility. Employees bound by them are less likely to change jobs, less likely to move into a role that better matches their skills and less likely to start a new business. What should be a normal career step instead feels like a legal hazard. Consequently, Australian workers with non‑competes earn about 4 per cent less than those without. For someone on a typical income, that is about $2,500 a year gone.
International research tells a similar story. A new study by Matthew Johnson, Kurt Lavetti and Michael Lipsitz, just published in the Journal of Political Economy, tracked changes in how non‑competes were enforced across US states over 2 decades. They found stricter enforcement reduced earnings and lowered mobility. Their estimate was that banning enforceable non‑competes nationwide would lift average US wages by between 3.5 and 13.7 per cent, with the midpoint at 8.6 per cent. To put that in perspective, that is about half the wage premium that unions deliver. The study also found that the burden is not shared equally. Women and non‑white workers bore roughly twice the earnings penalty of others.
It’s worth emphasising a key point. The Journal of Political Economy study focused on enforcement because the evidence shows that even where non‑competes are technically unenforceable, many firms continue to use them. Such employers rely on the chilling effect: workers see the clause, fear the legal risk, and stay put. The contract does its work, even if it would never survive a courtroom challenge. That’s why many have suggested that it may not be sufficient to declare these clauses void; we also need to make it unlawful to include them in the first place.
This new study supports the findings from earlier research. When Oregon banned non‑competes for low‑wage workers, wages rose by 2–3 per cent. Hawaii’s ban on non‑competes in the tech sector lifted new‑hire pay by 4 per cent and helped spur a 10 per cent increase in the number of tech firms. Since 1872, non‑competes have been unenforceable in California. One reason why Silicon Valley came to dominate technology was that workers could walk out to create new firms. These examples underline the same lesson: remove restraints and you free up pay packets, mobility and entrepreneurship.
Put together, the evidence is unambiguous. Non‑competes are becoming more prevalent. They push down wages. They hold back job mobility. And they act as a brake on entrepreneurship and innovation.
5. Unbinding the myths
When we talk about reforming non‑competes, a few familiar objections pop up. Let me run through the greatest hits.
The first is that the common law already offers protection. In theory, courts begin with the presumption that a restraint of trade is against the public interest, and only uphold it if it is narrowly tailored to protect a genuine business interest. In practice, the story is very different. Employers can and do seek injunctions at the first hint that a worker might join a competitor. The threshold for an interim injunction is relatively low. Once granted, it effectively decides the case, because the employee cannot work in the meantime and few can afford the long expensive battle to trial.
The imbalance of resources between employer and employee means that many restraints never get tested at all. The doctrine that was meant to protect the public interest in mobility has become a shield for employers and a sword against workers. What looks balanced in a textbook plays out very differently in the real world.
The second objection – somewhat at odds with the first – is that employers need non‑competes to protect their secrets. But Australia already has a toolkit for that. We have intellectual property law. We have confidentiality agreements. We have non‑disclosure clauses. You do not need a non‑compete to keep the recipe for Coca‑Cola safe. And you do not need a blowtorch to toast a marshmallow.
The third argument is that workers ‘agree’ to these clauses. But US evidence shows only about 1 in 10 employees ever negotiates their non‑compete. Let’s be honest. Most fresh hires are not haggling over restraint terms when they are signing a new job contract. They are focused on the salary, the hours and whether they can get time off at Christmas. Non‑competes are usually buried in the fine print, offered on a take‑it‑or‑leave‑it basis. Calling that agreement is like saying you ‘chose’ the middle seat on a packed flight or ‘chose’ clause 17 in the contract for the software you just installed.
The fourth claim is that non‑competes encourage firms to invest in training. The idea is that if workers are prevented from leaving, firms will feel more secure in skilling them up. But that turns the logic of training on its head. The best way to keep staff is not to lock the door, it is to create a workplace where people want to stay. If training makes someone a much better worker, then maybe they do deserve a pay rise. Look after your employees. Give them career progression. Make sure they feel valued. Chains are a poor substitute for loyalty.
So when you look closely, the case for non‑competes crumbles. Under current common law arrangements, non‑competes are reducing productive job mobility. Once non‑competes are removed for most workers, the real protections for employers will still remain in place. Few people negotiate over their non‑compete clause. And the training argument is more wishful thinking than economic analysis. What is left is a set of clauses that suppress wages, limit mobility and slow down the spread of ideas.
6. Unbinding the law
That is why the Australian Government is acting. By banning non‑compete clauses for workers earning under the Fair Work Act’s high income threshold, we will ban them for 9 out of 10 of the workers covered by that Act. Childcare workers, security guards, brickies, retail workers, hospitality staff and nurses should not be forced to get permission to use their own skills.
The reform does not stand alone. We are also banning wage‑fixing and no‑poach agreements: the backroom deals where firms quietly agree not to hire one another’s staff. Those arrangements do not just stifle competition. They make a mockery of the idea of a free labour market.
Getting the details right matters. Treasury’s consultation asked how the ban should be defined, how it should be enforced and how to make sure it works in practice. The submissions gave us a wealth of advice. Some were short and sharp. One worker simply wrote, ‘Please get rid of these clauses, they’re ruining my life.’ Others ran to dozens of pages of legal analysis. Together they are helping shape the legislation that will come before parliament.
Good reform takes time. Contracts need to be updated, employers need to adjust and workers need to understand their new rights. That is why the start date is 2027. Between now and then, we will continue to consult, to draft carefully and to make sure this change is introduced smoothly.
The principle, though, is simple. Australians should be free to use their skills. They should be free to change jobs without fear of a legal letter. They should be free to start a business if they have an idea. A healthy labour market depends on freedom to move. And taking effect in 2027, that freedom will be restored.
7. Unbinding the economy
Non‑competes are one piece of a much larger puzzle. Our aim is not just to free up workers, but to make the whole economy more competitive and dynamic.
That is why we have already enacted the most significant reform of Australia’s merger laws in half a century. For too long, mergers slipped through with little scrutiny, leaving markets more concentrated and consumers paying higher prices. The new regime puts competition first, so that deals are judged on whether they help markets stay open and fair.
We are also revitalising National Competition Policy, the landmark reform agenda of the 1990s that helped deliver a lasting boost to living standards. This new phase is tailored for the challenges of today’s economy. The priorities include streamlining planning and zoning so new firms can enter, recognising overseas standards more easily so consumers have cheaper and safer products, supporting modular construction to lift productivity, introducing nationally consistent worker screening to boost mobility in care and broadening rights to repair so people are not forced to throw out what they could fix.
We are doing this with evidence, not guesswork. The Competition Taskforce in Treasury is using microdata to identify concentration hot spots across the economy: places where markets are already too concentrated and where further consolidation would hurt competition.
The vision is simple. We want an economy that looks less like Monopoly, where one player wins the lot, and more like Lego, where everyone can build and create. And unlike Monopoly, an economy built on Lego doesn’t end with someone flipping the board in frustration.
Competition reform is not about theory. It is about lower prices for families, better choices for consumers and stronger productivity for the nation. It is about making sure talent and ideas can flourish, rather than being bottled up by outdated rules and cosy deals.
The ban on non‑competes is part of this bigger story. It removes silent shackles from millions of workers, just as merger reform reins in concentration, and National Competition Policy lowers barriers to entry. Piece by piece, we are building an economy that is more open, more dynamic, and fairer.
8. Unbinding the future
Let me finish where I began, with the workers whose stories came through in the consultation.
A laundromat manager told she could not take another job in her own town. A health worker confronted with an ‘indefinite’ restraint across 2 countries. A young engineer barred from working in his own state for a year. These are not outliers. They are everyday Australians, facing extraordinary restrictions on their freedom to work.
Non‑compete clauses do not just dampen wages and slow innovation. They do not just widen gender and racial pay gaps. They cut against values that Australians hold dear: freedom and fairness. The freedom to put your skills to use, to move when a better job beckons, to start something new. And the fairness of being paid what you are worth, without artificial restraints holding you back.
By scrapping non‑competes for the vast majority of workers, we are restoring both freedom and fairness. We are unbinding people from contracts that told them to stand still when they wanted to move forward. We are levelling the playing field so that opportunity depends on talent and effort, not on whether your boss decides to clip your wings.
And we are doing it alongside broader reforms that tackle concentration and strengthen competition across the economy. Together, these changes ensure not just better markets, but a fairer society in which Australians are free to pursue their ambitions.
Because competition policy is not just about prices and productivity. At its heart, it is about freedom and fairness. It is about unbinding workers, unbinding ideas and unbinding the potential of Australia’s future. Unlike a non‑compete clause, that’s something we should all be free to sign up to.