NCP Documents

Private sector involvement in infrastructure should be open to competitive bidding, and should involve risk sharing. yet the Airlink project did not involve competitive bidding, no cost benefit studies were released nor were there independent studies of contractural arrangements. Government assumed most of the project risk. (Waller R. Sydney Airport Link: Anatomy of a deal: A Case Study of Private Involvement in a public sector Infrastructure project', PSRC-UNSW, 1994

Australia evolved in different way to 'stateless' societies of UK and USA. It was not until 1930s that private spending exceeded public capital spending. The Australian state was a nation building state, and proposals to change it must start with this recognition. Arguements for change include: (a) public sector is bloated (yet Australia has a relatively small public sector and tax rates amongst OECD nations) (b) public sector is unproductive and crowds out private sector (yet research shows: no negative relationship between levels of government spending; top 5 economic performers in OECD all have much higher levels of public sector spending than Australia; core infrastructure is essential to productivity; (c) public sector is inefficient (but large improvements have been made in GBE productivity in Australia resulting in rates of return near private sector (EPAC)). The fact that a narrow goal of economic efficiency is targeted (which is taken to mean reducing business costs of production) is the problem, as (by definition) it always requires cutting public spending and wages (Pusey M, Economic Rationalism versus Social Democracy: The Battle for the Industrial relations syatem and the Public Sector, UNSW-PSRC Discussion Paper #35, 1994)

Private provision of prisons in USA arose because of problems of prison overcrowding, judicial orders to improve prison conditions, and difficulties in obtaining voter approval for financing. The latter two conditions did not apply in Australia (Chan J and Matthews c', Privatisation of Correctional Services: A selected bibliography', UNSW-PSRC, Information Paper #9, 1992)

SUMMARY: Effective competition will usually improve efficiency and dynamism of economy. This can need to be balanced against size needed for economies of scale and scope in small economy. There are other economic and social objectives (balance of trade, ensure R&D, facilitate small business, protect consumers, ensure long term investment) but this can often be done without weakening competitive vigor of market. Competition is determined by market structure, and incidence of restrictive practices. Concentration of ownership is significant. Though research in Australia has not shown this leading to inefficiency or high profits, this can happen at times. Concentration is relatively high in Australia, though tax changes have reduced incentive. Technological and managerial factors also reduce importance of scale economies. Increased competition may follow reduced border protection. However is not always as effective as domestic competition. Competition law does not deal with existing monopolies. Mergers can both reduce competition and increase productive efficiency, a trade off which needs to be assessed. An alternative to restrictingmergers is to restrain anti-competitive behaviour. Market power gives rise to monopoly profits which can not be prohibited, but abuse of that power to damage competitors can be. Collusive agreements can give rise to market power - which have been outlawed. Self regulation is an alternative to legislation, but requires care to avoid restriicting entry - possibly involving consumer representation. Anti-competitive practices outside corporations power is hard to restrict eg by professions - but this should be sought. Many markets are regulated by governments (restricting entry). Some are now outdated. Efficiency gains in UK resulted from competition not from ownership changes. Regulation provides power to government tarding enterprises, and these should be subject to TPA. Regulatory policies impeding interstate commerce are to be reviewed. legislation can not sensibly be subjected to competition test. Regulatory reforms have occurred, and should be facilitated by new procedures (where: legislation states objects; existing business regulation is reviewed re its usefullness; consider in terms of TPA major message; regulate to minimise competitive impact; advisory bodies should have consumer representation; and regulators should not become entrenched). Price surveillance may be needed as supplement, but is second best option. Competition and the Public Interest: Competition is promoted by policies to limit market power (so firms can not give less or take more without challenge). Competition is determined by number of producers, market shares, management attitudes, foreign competition and potential for new entrants. Competitve markets promote more efficient resource allocation, technical efficiency and dynamic efficiency (speed of response to opportunities and threats). Contestability has been seen as an alternative, but may seldom apply. Competition also prevents inequality of opportunity from exploiting monopoly positions. Size: There can be a conflict between competition and technical efficiency (because of need for firms to tap economies of scale and scope (involving combining production of several ierms with common inputs) - where if such economies are large, competition can be limiting). This has shaped trade practices law in Australia. Concentration is not a problem in Australia if market is contestable, or subject to international competition - the latter having been major stimulus to improved technical efficiency. Small business: Where scale is important, large businesses will have advantages. However this should not result in abuse of power. Innovation: Evidence does not strongly support argument that firms with large market share need to be tolerated because of being more innovative. Limited proection from patents etc is available. Prices: Competitive markets may have great price variability, which is one reason for price stabilisation schemes. Futures markets may also help. Countervailing Power: Producers may seek collective action to gain bargaining power when dealing with only few processors - but there may be ways to do this without imparing competitive price flexibility Terms of trade: Comptition amongst suppliers may reduce terms of trade. An ABARE study found too little evidence to show whether coordinated action against limited or unified foreign buyers woiuld be effective. The IAC found no evidence that Wheat Board obtained higher prices by restricting competition amongst Australian suppliers. Australia does not want price premia. Government accepts (for coal) that export controls require greater interaction with industry, market intelligence, effective consultation on price formation; and intense scruiny of settlements. Conservation: Restrictions on competition are needed for non-privately owned natural resources, to achieve both efficiency and conservation. Public Enterprises: Competition might reduce government's ability to pursue social objectives, though there are often more cost effective ways to achieve those ends. Investment: Does competition encourage short term profit oriented approach (cf Japan where financial structure and conventions prohibiting takeover encourage long term approach. Issue is whether capital markets ineffectively discount long term investment returns (say due to lack of information). Consumers: Intervantion may be needed where market does not provide consumers information; information is too technical; or health / safety issues are involved. Consumer protection does not need to create market power. Regulatory restrictions often benefit producers not consumers Compliance Costs: should be minimised Conclusion: achieve goals without undermining competitive forces.

Industry Assistance Commission, The Wheat Industry, 29 sept 1983, No 329, Notes:

· the IAC is primarily concerned with the efficiency of resource use - though this is only a small component of the potential productivity gain (see Section ?). This takes no account of what would be required for Australian enterprises to capture and exploit market power internationally.

· It is accepted that Australia is a price taker in wheat market, rather than seeking solutions where this might not apply. As a price taker Australia's benefits from participation in the industry are very limited (eg any technical progress largely benefits purchasers, rather than producers - because price is bid down

· IAC suggests the use of open tender arrangements for international sales, which provides no prospects that anyone could negotiate a better outcome through deployment of smart business strategies. The fact that politically accountable institutions like the Wheat Board probably could not do so effectively doesn't mean that no one could.

· the adopted definition of 'assistance' was very wide, but the assistance which was measured are very narrow, being confined to monetary support. This was inadequate in a situation. It is now being said that the knowledge assets of companies (acquired from learning) are now often more important than their physical assets, and where knowledge is the form of assistance which has been effectively deployed in East Asia (see Section ?). The latter is thus neither able to be measured or acknowledged.

· the IAC discussed 'selling' arrangements (ie getting rid of a product as a price taker), rather than marketing. The latter involves identification of market requirements, producing to suit this, and rapid responses to change.

· the market was discussed in terms of the quantity sold, not in terms of how the market is organised, which would be the essential starting point in devising methods to capture value added (BAE is quoted as having worked on market - what has it done).

· the ability of the Wheat Board to acquire information about the market was discussed only in terms of information about the situation in Australia, without considering the information about international market conditions required to negotiate a good price.

Private involvement in public infrastructure is limited because: risks are inevitably born by government, which alone can control them; advantages of private participation flow from competition which is impossible for natural monopolies; and because they are monopolies they must be regulated by government, and thus constrained in introducing innovations (Neutze M. 'Private Sector Involvement in Public Infrastructure'

UK 'Thatcher Miracle' was associated with monetarist approach, which proved ineffective (eg the idea that public sector borrowing requirement correlated with growth of money supply). It has not dealt with inflation, or prevented a current account crisis. Recovery was based on a demand lead consumer boom. Privatisation has not eliminated constrain whereby domestic growth encountered supply limits, encouraged imports and a current account crisis. Privatisation has taken the form of denationalisation, and contracting out. Privatisation based on view that ownership change will lead to competition and greater efficiency, and that PSBR is root of all evils. Sound economy has not resulted. Reveune raised was used to feed consumption. UK created large private monopolies throughy privatisation, yielding excessive profits. This has reculted in massive increase in regulation. Uncertain regulatory framework for privatsied firms inhibits their longer term investments. Extensive monitoring of entities is no different to straingth nationalisation. Detailed price monitoring has been established (which firms alone have info to do). Regulations have related prices to costs, which has externalisty and equity effects. interventionary mechanisms were established similar to old system of nationalisation. Privatised firms have moved into mergers and takeovers. Privatisation has not improved efficiency, whilse firms remaining in public sector have. Contracting out achieves initial cost savings (a type of loss leader to gain access) which are not sustained in the longer term (and quality is a problem). Also cost reductions are achieved by bidding down wages. Some options are suggested (Thompson G. 'Privatisation and the thatcher Miracle: Any lessons for Australia', Evatt researchh centre, 1988)

Government enterprise performance was poor (due to requirements of their ownership structure). Governments have been slow to advance pro-competition reforms. Competitive neutrality: CPA aims at competitive neutrality, ie to create similar conditions to private sector. Key advantages and disadvantages which affect competitive neutrality are: exemptions foro legislation; guaranteed markets; prefential arrangements for inputs; inflexible laboutr markets; tax exemptions; no sharemarket monitoring; lack of pressure to cover costs / earn return; inappropriate capital structures; inappropriate dividend policy; government guaranteed debts; non-commercial activity; and abuse of market power. Best Approach: Direct removal of each advantage / disadvantage is best (or use of proxies if unavoidable). Corporatisation and commercialisation are two methods for competitive neutrality. Commercialisation is not recognised under CPA but may be OK where: model includeds all taxes, fees regulations; and costs of corporatisation outweigh benefits. CPA provides for full cost attribution - requiring agrements that estimates of overheads should be on a stand alone basis. It should be agreed that CPA provisions can be accepted by privatising, franchising and contracting out (though not if businesses can exploit market power, gain preferential treatments on inputs, output, regulation; face no effective competition; or are not exposed to competitive neutrality) Significant Businesses: should be based on government's own view. The same functions should be considered significant in all juresdictions. A comprehensive stocktake is required. All non-profit government businesses, should be subject to competitive neutrality. CSOs: CPA does not define CSOs. A definition is suggested. CSOs should not be funded by regulatory restrictions or cross subsidisation; should use avoidable costs methods unless good reason exists (BIE 'Focusing the Competition principles Agreement', May 1996.

(1-2) concludes that claims of 20% cost saving without reduced services are unproven - various increases in costs with contracting out suggested. also suggested problems in surveys on which estimates based (eg compares actual costs with tendered costs - before extras; no attempt to isolated unrelated influences (in face of massive change); no data collected on client side costs; little data about costs prior to contracting; inclusion of irrelevant data; some services have always been contracted, and savings due to introducing competition can not be ascribed to contractingg out per sec; suvey methods indicate bias towards desired conclusion). negative employment effects of contracting, and also preponderance of multinationals in markets for govt contracts. (3) cost reductions come from lower wages, incresased work intensity, and losses through tax evasion. rate of return on public debt much lower than private debt - thus public ownership cheaper. public ownership with competitive tendering cheaper than BOOT. (4-5) shows significant downgrading in employment conditions (6) decline seen in service quality with contracting for cleaning in schools - survey (7) high propoertion of those affected by contracting were women, or of ethnic backgrounds. this reduces governments ability to pursue social justice goals. (8-9) separation of purchaser / provider distances policy from putting it into practice, and leads to staff duplication. identifies aspects which make community services different. (10) economic objectives of competitive tendering do not dominate wider and more complex social / political objectives of government. contracting reduces ability of agencies to respond to changing human need. identifying need , ensuring quality is hard under contracting - and where questions of satisfaction depend on knowledge of what is available. Paddon M. Thanki R. 'Australia's Contracting Public Services', UNSW, PSRC, Collected paper #2, 1995 [good on issues to consider]

Competitive Tendering and Contracting DAS, a bibliography

Marsh D., Implementing Thatcherite Policies

Sacher M and m 'performance measures Applied'

private sector already undertakes most commercial functions in ports. thus potential efficiency gains are outside the control of port authorities. new zealand is shifting back to public ownership after having privatesed ports to make them more competitive. requirements for competiveness depend on global trends in shipping, hub and spokes etc (Everett S. Privatisation of ports', AJPA, dec 1995)

accrual accounting valuations and accountability in government: a potentially pernicious union (aiken m and capitano c, AJPA, Dec 1995): accrual accounting erodes centralised macro economic planning, as financing may proceed without ministerial approval. accounting should produce info which avoids deception. normative principles of economics and of government are similar providing free competitive markets exist, but not otherwise - when parliament should dominate. otherwise accounting allocations can become taxes without parliamentary approval. private sector preference for current cost accounting (rather than historical cost accounting) has now been introduced. This should ensure efficient resource use, but in practice governments have used this to justify increased chanrges which are milked off (not used for asset replacement). If repairs treated as expenses, then also counting depreciation (where asset is never reconstructed) is double charging. Transfer pricing is less efficient than direct payments of benefits, but eliminating it may simply lead to less welfare payments. For public assets estimates of values and depreciation can be only a guess. Assumptions underpinning full cost accounting are: (1) taxpayers can be divorsed from consumers (equity problems can arise where assets acquired with funds since repaid, where ascribe and charge for current value causes equity problems - ie pay for the same asset twice - the purpose of accounting has now become efficient resource allocation where it used to be avoidance of deception); (2) contractural history was traditional basis of accounting - not now (3) governments may assign loans to related institution thus reducing debts, and continuing to earn revenue from assets (4) entities can be defined and their assets valued (disclosure for evaluation is supposed to link to economic decision making - though prime traditional focus was with statutory compliance) (5) current costs are necessary so can replace when wears out - valuation only relevant in competitive markets . Accountants need to consider the consequences of the way they assign numbers according to culture, ethics (moral implications) - must be specific, not generalised market measures - outcomes must be assessed, not just outputs. Economic advisors have failed to consider distirbutive aspects of changes in accounting roles. decentralised control under rate of return encounters problems as managers of institions control accounting valuations, accounting standards and operate on-cost basis. outcomes are result of such measure, not means for controlling them. decentralisation to instrumentalities who value social issues less is adverse for welfare outcomes

round d 'twenty years of modern anti-trust in australia: she'll be right mate', review of industrial organisation 9, 1994: trade practices act of 1974 had problem in that language was loose. definition of competition. structural approach not OK, must look at practices. result is truly aust approach because: came late to anti-trust; highly concentrated market; previously protectionist - result was tough prohibitions of competitive conduct, misuse of market power, vertical practices and mergers. National competition policy review in 1993, set new directions. many controvercial. over past 20 years act was attorney general responsibility, now treasury (because of competition / micro-economic reform emphasisi); feds also centralise regulatory responsibility in Treasury. Brunt identifies features of anti-trust in Aust as market definition (what is it)???; pure market power standard; treatment of vertical pricae and non price conduct. three reasosn: small economy, court limitations in economic regulation, and history. Hilmer is rejection of Act. need care with interface between act and new regulatory regime - even though economic law, this is still in confluct with law. [cf common law, which rejected wisdom of king] - main problem is feasible and universally applicable operation al test of substantial lessening of competitiion; and substantial market power [japanese trading cos handle much of australian exports] Norman: uneasy relationship between economists and lawyers. anti-trust is mature independent of growth of economic theory. French: produced definition of market; requires purposive evaluation beyond mere fact finding. economists do not agree either. Round: price fixing has been tolerated by judges - will take time to see it as economists do. have no easy tests (unlike US structural evidence from cartels). Williams: in dealing with misuse of market power, predatory pricing . only inefficient conduct should be prohibited. Williams: questooned aspects of hilmer which sought structural separation to overcome vertical integration - say this misinterprets high court decision, that this depends on being inconsistent with competitive market. New access regime might by-pass efficiency based principles from high Court. McEwin studies vertical arrangements - very complex area, about which there is long list of prohited behaviour. some vertical practices illegal, while others subject to competitiin test. Non price vertical practices have been dealt with by administrative not judicial action.High court dealt with third line forcing by literal interpretation of act, not economic analysis. some have argued benefits from price maintenance, though illegal - hilmer says let be decided on efficiency grounds. price descrimination sections need to be repealed. Johns: merge policy initially favoured to build strength. then prohibit mergers, now only those likely to lead to less competition. aust had market power standard that could be over-ridden by efficiency standard. is allowing mergers needed for efficiency, or is competition main source of better performance. broad cponsensu on anti-trust emerged gradually - has changes collusive coercive, exclusionary predatory nature of aust business - some say assessment of mergers for market test produces commercial delays.

IAC, growth and revenue implications of hilmer and related reforms , March 1995: outlined assumptions at length in making estimates. conclude increase GDP by 5.5% of $23bn); 30,000 more jobs and 3% more pay. effects widespread, few sectors miss out; large gains by govts (feds 5.9bn, state 3bn); government lose on GBE revenues, but gain on payroll tax. state reforms contribute 4.5% of gains, feds only 1%

Guille h. flaws in corporatisation: critique of the queensland green paper , PSRC, UNSW Discuss #15,June 1991. put govt under market driven management control negates functions of public setcor; corp is interim step to privatisation; competition doesn't always lead to efficiency (depends on what goals set); efficiency not sole PS goal; no evidence people want enterprises outside govt control; cross subsidisation is replace by CSOs which are hard to identify and cost. corporate forms (accrual accounting) provides scope for massaging info. supposed to unlesh managerial talents which may be scare; bettwr management in UK / US introduced short term cost cutting long term falls in services; flexibility means lower wages

OECd competition and economic development, 1991: (detailed needs close study) : (i) the contribution of competition to ED (more sace for market, not static, policy conflict) (ii) main competition policy approaches (a) stimulating innovation / technology (b) maintain structurally competitive markets (c) preventing collusion in markets (d) prevent abuse of market power (e) means for compettion enforcement (iii) relationship between competition and economic policy (a) regulatory reform (economic liberalisation, increasing public service efficiency) (b) competition policy and dereg (reasons for regulation, trends in reg reform and privatisation, motives and effects, role of competition in dereg) (c) trade, technology and comp op (egs of brazil, Korea; competition and international trade)

Guerrin - always slide away from main goals onto managerial agenda. Beazley: outlines reforms, just like now proposed Rayner (re Canada - outlines linkage of deficits to slow growth of revenues; thus rethinking government, more client centered) loughey (new brunswick response); belgrave - customer service in terms of policy for ministers; guerin : some important thoughts about the problem of assessing performance - walsh - reasons for commission's of audit - to get sharp changes in practices needed - states had been slower than feds to move - because lacked expenditure control, priority setting process - stretton : problems in use of competition in public housing SelF: problems with market based organisation of government (independent policy - rather just what ministers want to hear; accountability, equity, coordination; democracy; Travers - problems with quasi markets for social programs; also issues for / against real markets; no one finds problem being solved RYAN: contracting does not improve service delivery - policy making - fragment systems HUGHES: justification for pro-competition policy is not strainght forward - pro-competition policy led to decline in competitiveness. Selway - managing GBE risk with implied guarantee WILLs : community alliances and new governance (starts with good point, then gets confused, but may illustrate the problem; BARTOS: performance information - links interest of ministers and officials with outcomes (not just outputs). - looks sound Lawrence - international comparisions on infrastructure (SEDGWICK) - benchmarking and best practice (can't stand alone) Treadwell (benchmarking case study)

economist 27/7/96 'the end of the feast' - proposal to deal with legal system - given that it is closed shop, free from competition, and untouched by technical progress

economist 27/7/96 'the hidden cost of red tape' -proposes that the cost of regulatory compliance should be treated as a separate 'budget' in line with fiscal budget.

Engineering the transition to competitive utilities (IEAust): about skill requirements in a competitive envirobnment

speech by ted Kolsen: another committee appointed after hilmer to look at part 10 of trade practices, dealing with shipping - went over same ground as Hilmer from viewpoint that there are some things you can't control. Different view to hilmer - no economist on hilmer committee. Competition used, but not defined. Similarly with markets - and no discussion of relationship between markets and economics. Many different types of markets - Hilmer never referred to oligopolistic markets. Have to examine each on merits wrt competition. Said that exporters should not be allowed to form cartel, yet dealing with shipping conferences who are cartels. If one side of market is highly competitive but other isn't then ; need to reduce competition for balance; need for industry specific regulators (ie those who know something about it). But only area where no competition is in regulating monopolies. . promlem is the assumption of perfect competitiion. In dealing with Japan, no competition policy - but co-operation poloicy; australia tries to have no idea what is in national interest - only country to do so.

'excellence' - history of reduction in protection

argy - australia's competitive handicaps - how far are governments to blame' - reasons for concern with competitiveness. Need to raise savings to deal with CAD - easy so long as keep economic growth slow. Need to raise productivity - business points out obstances to major gains: capital (no big deal); exchange rates (hard to know what is right); industry assistance - some but not as much as others; labour costs / regulation - high on costs - regulation has improved but still lacks flexibility; tax not high overall; business regulation; infrastructure - issue; fitzgerald and shann argued at least half potential productiviyty gains required in private sector (Developing Australia's National Competitiveness) - major cause of Australia's trade problem is management

misuse of market power: outlines re sect 46 of TPA - with substantial market power, action to render competition less likely.

Commercialisation of general government - Howard - summaries arguements for and against user pays in its effect in social policy areas

howard M. From GBEs to general government - outlines push to smaller government

democracy downsized: auditing the commercialised public sector (meutzelfelt) - UK process to audit whether or not democracy operates

National Competition Policy 9Hilmer, 1993): special problems because of many juresdoctions; PM lable competition as driving efficiency; defines goal of CP, what it is; reasons include technical efficiency, allocative efficiency, dynamic efficiency; reasons for NCP - single national market; many sectors still sheltered; only sectoral toddate; suggests principles. Findings: (1) Competitive conduct rules (reduce exemptionds from TPA, examined its adequacy, suggested changes to rules, considered arrangements for exemptions (by independent body, specific exemptions, by regs, by govts, shield of crown, constitutional limits (2) additional policy elements: reg restrictions on compettion (recommend govts adopt principles ....); structural reform of public monoplies (OECD work shows this needed; recommends principles for govt to adopt); access to essential facilities (recommends new legal regime); monopoly pricing (main gola is to increase competitive pressure - but otherwise need careful price oversight); competitive neutrality (suggests principles for govt); (3) Implementation : first institutions (avoid industry specific regulators because of threat of capture; role of states / feds - cooperative; suggest NCC for research and ACCC for administration; legal issues - most power - but favour cooperation [[interesting that don't favour competition]]

Howard M. Commercialisation of GBEs and the debate over CSOs. : defines GDE role re stat authoritoes; commercialisation was introduced with CSO concept. But no actual effort to illustrate scope for CSOs, treated as marginal. Rules fo4 corpate structures preferred; commercialisation has no effect on consumers, mainluy on staff; Treasury paper on 'social responsibilites of cwealth SA and GBE - wants CSOs tightly defined; problems in estimating costs (how to deal with overheads, need for info systems); funding of CSOs (by subsidies; direct budget; lowerr return on capital). Narrow set of CSOs will emerge. No systematic assessmnet of non-economic effect of commercialisation, only of effect on rate of return

'social responsibilities and performance measurement for GBEs' Treasury. Economic roundup, May 1990 - defines; measuring; funding; reporting on CSOs

donnelly s 'corporatisation and commercialisation - impact on ability to review and appeal govt decisions' PSRC, UNSW - prior papsr showed limited scope under corps act to provide public accountability for GBEs. This paper shows that escape from administrative law (eg FOI)

marginson s 'development of educational markets in aust - june 1991 - reviews history - comments on Deveson Committee report on commercialisation of training

johnson m 'reassessing the economic role of the private sector in aust (PSRC, nov 1990) - questions the ability of improved public sector performance to really deal with australia's CAD and debt problems, as well as Accord had tried to do

Guthrie J 'The adoption of corporate forms for govt undertakings: critical issues and implications', PSRC - dec 1989 - loss of ability to take such broad approach to auditing - concerned only with financial statements

OECD 'Interim Report on Convergence of Competition Policies', Working Papers Paris, 1994 - increased economic activity internationally - leads to convergence, which OECD assists. Reasons: international rather than national markets; many now amending; greater convergence facilitates enforcement; evidence that happening. Areas of convergence: definition of competition policy; principles of non-descrimination / transparency and due process / rule of law. Objective is efficiency; coverage is uniform and universal; market definition (requires economic analysis, dimensions are product / geography); barriers to entry (still differences); horizontal agreements; vertical relationships; abuse of market power; merger reviews; enforcement; international enforcement; info sharing

OECD 'Competition policy and environment', Working papers, Paris, 1996 - concerns risks in environmental regulation of impeding competition [[ note that no one has asked whether competition may erode ability to environmental regulation]]. Potential effects; on one or more markets; types of effects (barriers to entry, facilitating collusion); types of intervention (direct regulation - limited in impact, also subject to capture; alternative is economic instruments (product charges, waste charges, deposit refund, tradeable permits; and self regulation; combioned gobt / industry intervention - voluntary agreements, intercompany coorp - watch risk of collusion) [[also shows how Japan defines competition policy

Hilmer F, 'competition policy: underlying ideas and issues', nov 1995, AGSM Discuss paper #337: now central to reform, and internationally. Initially discussed only extending TPA, then realised need to do more; underlying view was that competition beneficial; but it is hard to get effective competition (studies identify difficulties in assessing whether competition effective); sometimes competition is not practical (eg facilities access; and structural questions); access pricing as hard question; pricing controls also hard (economic 'no-no'?); dissatisfaction with social outcomes; while costs of social goals high, no research has been done in how to meet social goals best; methods preferred can be hard to appliy / subject to abuse / unknow effects on groups. CP no simple answers; art rather than science.

Industry commission 'annual report 1994-95', why growth is important; how MER can help; making competition work; implementing NCP (various elements); reducing barriers to international competition; other industry support measures (budget outlays, govt procurement, anti-dumptin, restrictions on services trade; preformance monitoring; review of business regs; CAD and MER (can't reduce CAD without change in imbalance between savings and investment - has to come from changes in savings / investment behaviour not the other way around). [begs the question - what causes savings / investment behaviour] MER aims to increase proiductivity - needed for higher living standards - but not for effect on CAD.

New federalism goes into action Directions in govt, sept 91: reforms in elect, railways and roads aimed at greater efficiency (National Grid Management, National Rail Corp), special premier's conferences role

'redrawing the public service', dirn in govt july 1991; reform in NSW under greiner (separate strategic policy from operations); integrate organisations with common purpose; greater contestability; efficiencies by rationalising corporate support, head office functions and regional networks); also discusses savings with SES; examples of potential for cost savings in govt, but doesn't consider why exists)

'shoring up the cracks in corporatisation' Directions in Govt' march 1990: NSW proceeding with corp - model like NZ but differs. Issue: should capital raising be centrailsied to get best deal - raises question of implied guarantee; should management have autonomy to borrow when it suits tham or government; NSW careful to avoid errors made by FEDS for OTC and Aust Airlines (Refer to Senate Standing Committee on Finance and Public Admin on Cwealth GBEs) - rewards and sanctions important; problems about control exercised over Qantas / aust airline; highlights tendency of politicians to distort sensible prioritisation by dipping into treacle tin of patronage [don't understand purpose of our political system]; if govts maintain control organisations do not operate effectively; 7 objectioves of corp in NSW (accountability, efficiency); SOC's in NSW more accountable than in private sector as subject to fewer disciplines [insame in relation to previous comments]; monitoring aims at high level of performance; performance depends on quality of board of directos - to be professional - with competence (but no leadership).

National Competition Policy Review: issues under consideration: many experience competition - welcome in improving functioning of economy; concept of competition; can fail to deliver efficieny when market failures or other social objetcives; competition policy aims to facilitate effective competition in the interests of efficiency and economicgrowth while dealing with concerns about market failure and social objectives; aspects are market conduct, market structure, competitive neutrality, achiebving goals other ways; regulatory efforts to deal with market failures have other costs. (b) Cp in Australia - how deal with various aspects; (c) context of Review - agreed set of principles by govt; significant background of reforms - fragmented (II) issues - challenges: how to deal with competition not delivering efficiency; relatiosnhip of efficiency and other social goals; implementation difficulties of MER; constitutional poweres. Discusses Content (re market conduct, structures etc); Scope of NCP; Implementation (legal, institution, cwealth state, transition)

coulter j doing more with less: contracting out and efficiency in public sector' nov 93: practical as[pect of tendering and purchasing (ICAC); HRM implications of contracting; theory of contracting out; commercialisation of DAS; UK / Eurpoe experience with contracting out

'tired of capitalism so soon', economists 21/1/95 - eastern euope movingaway from privayisation, as a result of: poorly planned privatisation - shouldn't sell intact, break up, re-organise markets

gottliebsen R 'The Kennett experiment', BRW, 8/10/93: based on private efforts to downsize major corporations; victoria used new management sty;les; returning vic closer to NSW and Qld standards - dedication to long term planning stlye - brought in outsiders on commercial rates of pay

baxt R. Balancing competition and public interest' in Can we afford to be efficient: Competition and the changing face of Aust', 2/3/95, St James ethics centre. :initial 1974 act restricted non-compeitive behaviour, but not on grounds of economic efficiency; current proposals require that other than economic factors can be considered. Though australins are competitive, als beleive need to help others out. Object of Sect 46 was to protect consumers against ruthlessness of competition. Privatisation reduces willingness to provide services inless profitable areas. Governments balance desire for efficiency against providing range of services at reasonable price.

Hughes H. Markets, efficiency and ethics', in Can we afford to be efficient': markets operate in specific policy framework, if framework faulty markets can not help. Markets play key role in economy - balance demand and supply; handle uncertainty; in early capital;ist period markets did not deliver equitable outcomes. Planning was failed alternative. Reasons for market failures. Market advantage is efficiency, major source of failure is government intervention. Need moral society. Government intervention reduces morality. Markets contribute to equity by utilising labour, increasing available wealth for distribution. But social goals are govt responsibility

sturgess g 'virtual govt ' (CBPA - Reinventing govt) governments are operating in saturated markets, and looking for opportunities abroad - and facing domestic competition - also sees shift as dur to move from industrial to post industrial society

gellatly c 'reinventing govt in NSW', structural change made increases in productivity - govts at state level face financial problems; reform has to focus on outputs; use contracting etc to separate core / non core roels; key elemets in reform of GBEs (5); significant results; apply market test; 10 principles for competition; rationalise corporate services; enhance customer response; quality management; improve coord; empower people

mackey r. 'towards govt in 2010' (CBPA - Reinventing Government): reinventing govt speaks of sterring not rowing; requires governance dialogue and governance structures

gashler p., 'government as catalyst' (CBPA - Reinventing Government): re govt purchasing by defence dept; real public private partnership

boston k 'encouraging solutions through empowering' - system to become totally committed to supporting school not reverse - school councils; principals now educational leaders

proust e 'mission driven' (CBPA - Reinventing Government): transforming rule driven organisations to customer focus - local authorities in vic - competitive business strategy

lawson t and walker h 'meeting the customers needs', (CBPA - Reinventing Government) - how SA addressed consumer protection

coffey 'enterprising: concentrating on earning rather than spending' (CBPA - Reinventing Government) - re specialised services in NSW state library

rose a 'Revitalising service delivery by injecting competition', (CBPA - Reinventing Government) - explains (very badly) why do it - illustrates ignorance of some advisers

evans d 'strategically planning for prevention rather than cure', (CBPA - Reinventing Government) - how commercialisation / competition provides flexibility to cut costs and respond to environmental pressures

harmsworth p market oriented government (CBPA - Reinventing Government): application of commercialisation to TAFE

QueenasLND 'ncp AND Queensland local governmnet July 1996. The Statement reflects a pragmatic approach to applying competition principles agreement to local authorities. It featured: commercialising or corporatising major businesses (water sewage, garbage); voluntary code of competitive conduct for minor businesses; independent prices oversight for activities of 17 largest authorities; and review of all council laws in parallel with re-assessment of Local Government Act.

Queensland 'Competitive neutrality and qld government business activities', July 1996: NCP based on competition as engine room of economy, in view of need for international competitiveness; CPA designed to eliminate barriers to competition and ensure uniformity independent of ownership; summaries NCP; government goods and services have major impact on resource allocation; CN involves identifying / removing advantages / disadvantages from govt ownership (?? What about defining goals; selecting board) - special advantages seen as ..; disadvantages seen as - limits on markets in which compete; greater accountability; provide non-commercial services; reduced managerial autonomy 2 How achieved: where appropriate for SNA use corporatisation and apply full taxes, debt guarantee fees, apply regs (but not required to remove special regs; and otherwise - apply these requirements, and ensure prices meet costs; this is not new in Qld; corporatisation done - describes features; commercialisation done - describes features; full cost pricing (will apply where moving towards corporatisation; or where not suitable for corporatisation) - suggests principles; competitive tendeing in general govt (separate from NCP) - can get either external contract or internal service delivery through service agreement (Has 'Competitive service delivery for budget sector agencies costing guidelines' ??? - how can this work realistically); relationships between CSD and two different types of commercialisation are described; services provided through competitive tendering are listed; gridation between CSD, Full cost pricing, commercialisation, and corporatisation; implementation issues include: tax equivalence issues (treasury tax manual), debt guarantee fee (legislation coming) 3. Which businesses affected: three principles: must be business activity (defines rules); must be significant scale of operation (for which several criteria - scale of expenditure; market share; significane to qld economy); benefits must outweight costs (consideing esd, social issues etc) List of significant business activities 4 Managing reform process: taking care of consumers - seen as major benefit [?effect on international competitveness]]; assessing costs / benefits - public benefit test - list of factors - impact on market, prices, other suppliers, resource allocatoon; financial effects on business; state govt budget; consumer effect; social welfare and equity; on employees; on environment and sustainable management of resources; regional development; management autonomy and commercial flexibility of business; implementation costs; other (treasury will produce guidelines to perform test); must consult with affected groups; ensure social objectives not compromised (aided by clearer identification); csos; prices oversight body will be established; prefer consumer charter for ensuring consumer benefits; dealing with disadvantages of being government business (these are to be identified and dealt with in process of commercialisation etc ??? How?) 5 Ensuring competitive neutrality prevails - complaints mechanism

todd M `code threatens gas industry' company concerned that Gas reform could result in govt body involvement in defining services pipeline operator provides

'canny councils' BRW 19/8/96: local govts in Vic must put half work out to tender; local govt office has evidence of improved performance. Sydney council tendered work for own survival, now has own business unit tendering for others work. Councils win much of tendered work, accused of using market testing to get info for own benefit. - tenders can be opaque and biased. Self managed teams give good result [raises question about what causes improved performance under competition, and whether that can be achieved otherwise]. Threat of tendering leads to innovation. Complaints about conflicts amongst businessunits; grass roots see too much interference - things do not work as well; new zealand council competing for work in vic; melbourne's city wide wants to operate interstate

Thomas T 'Britian gets tough and saves a bundle', BRW 19/8/96 - with percentage targets councils tend to hoard their least efficient work and tender that they would win; UK government increased regulations so pile of red tape - tenders not credible

kohler A 'Power plays', Independent Monthly June 1996 - combination of telecommunications and electricity - innovation

bannerman R 'Development of Trade Practices Law and Administration', autum 1986, canberra bulletin of pub admin; history of law from: predecessor law like US anti-trust which failed in implementation; extent of anti-competitive behaviour in Aust; foundation in 1965 (rudimentary, but got things started); reform in 1974

howard j 'deregulation and privatisation' Canberra bulletin of publc administration, autumn 1986: divide between public and private is obscure; thouse advocating privatisation overestimate how much work is done by government without private; debate ignores continual incremental changes; privatisation puts gloss on concern for big government, and on mundane concerns about public sector finance. Statutory authorities created for independence - always trade off between automony and political control. Concern has arisen about funding for such bodies, from monetarist thinking which saw public spending as inflationary. Stat authorities have sought to eascpe constraints by techniques such as: contracting out in form of sale and leaseback; developer contributions; trade credit; and other arrangements which incur private spending. Causes problems for central authorities in accountability. So next stage is to shift equity / ownership to private sector, which does not necessarily mean less regulation (eg in UK). Dereg of private monopolies does not necessarily lead to less market control - as can be replaced by private agreements. Arguments for dereg flow from greater efficiency in competitive market, but most opportunity for profit in free market arises from technological change. Rapid technological cghange has occurred, and private enterprise is anxious to apply these technologies for profit. However though technological change arises, market failures still apply - and an effective free market is unlikely to arise. (economies of scale, externalities, uncertainties). Conflicts of interest arise where service providers also set standards - much privatisation debate about separation. Problems arise from public ownership when public investment is too low.

Crozier h 'achieving a new commercialisation in govt canberra bulletin of public administration ? date: commercial approach expressed by CSIRO in various ways: write more commercial research contracts, seek higher rate of cost recovery, charging true economic cost, and take results of research into equity arrangements. Previous success in agriculture based on non commercial approach - and with industry tried friendly relationships. Some differences to current situ ... feeling is that bonds of comemrce will somehow make business / CSIRO link stronger. First step was to create SIROTECH (as external body); many management changes - need personal practices giving inventives; accrual accounting; company type board; review of CSIRO; then review of corp centre; trying to change staff attitudes; appraoch to CSIRO change was stick not carrot; need cost centres with autonomy; govt must leave incentive to achieve change in self regulating manner; scheme which enables agencies to retain 25% of savings would help in developing commercial arrangement.

Dixon j 'private sector provision of public infrastructure', july 1991: what economic infrsstructure is; issues which arise (need for spending for economic performance, gaps exist, replacement, new types, govt constrained, private sector can, = monopoly, need risk sharing, super as funding source); source of govt constraints (artificial); legal restrictions (loan council; tax issues - complex; can get outside loan council with operating leases); structure of financing (ways to allocate risk, user pays gets over tax objections, need to replace / upgrade facilities, residual risk) using super funds

butler s (ed) 'the privitisation option: a strategy to shrink the size of government': Hanke: privatisation provides incentive to maximise efficiency . Savas types of privatisation: contracting out; franchising; vouchers; voluntarism; free markets. Obstacle - employee concern, ignorance of principles ... Poole - cost reductions - many examples; scope to create property rights; justified by eliminating bureaucractic foul ups; problems if do not go far enough (user pays - govt poor at rational pricing); contracting out (danger in playing favourites) .. Pirie (separate); ... Farrara - social secirity problems arise from 'pay as you go' - start up stage gives good return to those who contributre, now poor return; benefits may never be paid; IRA option.

Perie m 'the british experience' in butler (as above): comparisions of public sector with private sector (more expensive (40%); less efficient; higher manpower level; no menas for consumer input in absense of competition and choice; chronically under-capitalised -given political not economic criteria; non-innovative and inflexible; decisions based on electoral considerations; equipment poor and badly maintained; service liable to interruption - by strikes - though in public sector to ensure supply; slow to respond to changing trends and needs. Methods for control fail: efficiency drive (introducing private sector methods without incentive); economy drive (concentrate on trivial; amalgamate departments (and continue amalgamation team, also more powerful); eliminate unnecassary programs (none unnecassary in light of recipients; cash limits (cut service delivery). Thatcher's approach was not to control, but to eliminate. 22 methods

hendesron i 'reserved on change', Aust 12/9/96 - reserve bank rejected the idea that mergers between banks should be considered against the background of Australian banks operating in international environment [there is clear difference in need to suit consumers, relative to need to suit international competition]

see also Murphy G 'big business wants bigger business', FR 9/7/96

'the lesson of the last outbrak of deregulation is not to forget the lesson (FR, 13/9/96): dereguklation of financial system in 1980s was meant to lead to lower rates, and lending to enterprises leading to greater prosperity. iNstead they invested in paper entrepreneurs, and incured massive losses

Rae D 'Pathway to public sector best practice', FR 13/9/96: public sector should not be evaluated in terms of maximising shareholder; issues arising from competition include: duplication of resources across purchases provider splits; loss of expertise by purchasers; and loss of focus on community good by commercially focused providers

Doern G: 'towards an international anti-trust Authority Key Factors in the Internationalisation of Competition Policy' Governance: V9, N3, July 1996: Negotiations about market access (concerning investment, competition and intellectual property) are becoming more important than trade policy. This involves the rules of different systems of capitalism, rather than actions of government. This will determine which of competing systems of capitalism dominate. Many are seeking democratic, rule based systems. Competition policy involves that that which prevents restraints on trade. Internationally this is just a loose arrangement. Currently most countries endorse free trade, and provide less room than previously for non-economic / public interest criteria to affect competition. Despite this there is great dispute about what competition policy ought to be. System friction refers to existence of several different market models, where firms performance is influenced by its capabilities and characteristics of its home system. Other debate concerns competitive implications of strategic / managed trade (eg by supporting new technology sectors). This is criticised on basis of large knowledge governments would need to have / mobilise. Competition policy thus has to move out of realm of economics and also involve business school based theorists. An even more difficult issue involves the role of innovation in competition which those dealing with competition policy have been slow to recognise - but involves the role of 'strategic alliances' and policies on them. Competition policy has also become central to the political power and interests of nation states. Many mechanisms to harmonise competition policies have been established.