The Government is today releasing its response to the Report of the Productivity Commission inquiry into the Impact of Competition Policy Reforms on Rural and Regional Australia.
The interests of rural and regional communities are an important consideration in the development of Government policies. Many of our rural industries are highly competitive internationally and comprise a significant proportion of the economy. The Governments prime focus in assisting Australias regions to realise their potential has been to deliver sound macro and microeconomic management of the Australian economy.
A competitive, flexible economy will allow 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 Commissions Report is a comprehensive examination of National Competition Policy and provides a strong endorsement of this policy. The Commission found that, in addition to benefiting the Australian economy overall, competition policy benefits rural and regional Australia as a whole, with both consumers and the business sector benefiting from reforms. The Commissions modelling of selected competition policy reforms estimates that these will continue to provide a sustained increase in Australias income and in the living standards of Australians.
The Commission also found that the direct costs of some competition policy reforms have tended to show up more in country areas than in the cities and there has been more variance in the incidence of benefits and costs of competition policy reforms in rural and regional Australia compared with metropolitan areas.
The Commission found that many parts of rural and regional Australia are growing, with increased employment and rising living standards. Regional Australias population has increased in the past three decades and maintained its share of the total population. The decline of population in some regional areas largely reflects non-economic factors such as demographics and changing lifestyle preferences. As the benefits of competition reforms continue to flow through the economy, the Commission anticipates that virtually all regions will gain through increased income as a result of competition policy reforms.
Communities in rural and regional Australia are being affected by a range of influences, such as the long-term decline in global commodity prices, technological innovation and changing consumer preferences.
The Government endorses the thrust of the Commissions recommendations, which are directed at improving the way in which competition policy is implemented, and believes that measures adopted will increase community understanding of competition policy, and improve its implementation and operation, ensuring that the full benefits of reform are realised across the whole country.
The Government accepts the Commissions recommendation that generally available assistance measures should be the principal means of assisting people who are adversely affected by competition policy reforms. However, special circumstances can exist that require governments to consider specific adjustment assistance of a time-limited and targeted nature to facilitate the necessary change.
The Government is also releasing its response to the Report of the Senate Select Committee on the Socio-economic Consequences of the National Competition Policy Riding the Waves of Change.
The Government welcomes the contribution of the Committees report to the discussion and understanding of competition policy. Evidence provided to the Committee supported the Productivity Commission finding in its Report that, overall, competition policy has brought benefits to the community.
At the same time, the Committees deliberations also revealed that there is some misunderstanding of the benefits of competition policy since it is often associated with economic changes which are due to other factors such as social and technological change or other Government policies. The Committee concluded that governments have at times contributed to the confusion by citing competition policy as a reason for the reduction of funding for an activity, for the rejection of infrastructure projects, and for policies such as compulsory competitive tendering. The Government agrees with the Committee that such actions contribute to misunderstanding and confusion.
Much of the implementation of competition policy is the responsibility of State and Territory governments. The Prime Minister will write to Premiers and Chief Ministers, asking them to consider the issues raised in the Reports.
Copies of the Governments responses to the Reports will be released today.