National Competition Policy

The term National Competition Policy refers to a set of policies introduced in Australia in the 1990s with the aim of promoting microeconomic reform.

Origins

In 1992, an independent committee of inquiry, the National Competition Policy Review Committee, chaired by Professor Fred Hilmer, was established to inquire into and advise on appropriate changes to legislation and other measures in relation to the scope of the Trade Practices Act 1974 and the application of the principles of competition policy. The Committee presented its report, commonly referred to as the 'Hilmer Report', in 1993.

The report was used as the basis of the Competition Principles Agreement reached at the 1995 meeting of the Council of Australian Governments (COAG). The term 'Hilmer reforms' is now used to refer to processes arising from the intergovernmental Competition Principles Agreement and the associated Competition Policy Reform Act 1995 (Cwlth).

Key provisions

The stated objective of National Competition Policy, as it applies to the public sector, is to achieve the most efficient provision of publicly provided goods and services through reforms designed to minimise restrictions on competition and promote competitive neutrality. The principal reform required under the policy is the application of a public benefit test to justify the maintenance of any public policy which prima facie restricts competition. Policies for which a public benefit cannot be demonstrated must be repealed or modified so that they do not reduce competition.

The objective of competitive neutrality policy is the elimination of resource allocation distortions arising out of the public ownership of entities engaged in significant business activities: Government businesses should not enjoy any net competitive advantage simply as a result of their public sector ownership. These principles only apply to the business activities of publicly owned entities, not to the non-business non-profit activities of these entities.

Other areas of National Competition Policy require structural reform of public monopolies and require owners of monopoly facilities to negotiate third-party access agreements with other users.

Controversy

National Competition Policy was implemented as a top-down process, with little public debate or consultation. The result was a hostile public reaction, particularly evident in support for Pauline Hanson's One Nation party in the 1998 Queensland election. This reaction contributed to a general slowdown in the pace and extent of microeconomic reform.