Home Energy assets From groceries to energy, there’s not enough competition in Australia | cane sims

From groceries to energy, there’s not enough competition in Australia | cane sims


Jhe recent election campaign has focused a lot on low wages and inequality. However, he did not focus on an underlying factor for these problems. If Australia had fewer markets led by dominant oligopolies, and more enjoying strong competition, we would have less inequality, and higher wages and productivity.

Market economies are based on the forces of supply and demand, which constitute Adam Smith’s “invisible hand”. But this requires enough actors on the supply side; otherwise, Australians will be underserved by our market economy.

We clearly have, in my view, inadequate competition in Australia. Think beer, groceries, mobile service providers, aviation, rail freight, banking, energy retail, internet search, mobile app stores And much more.

Companies do not want markets where there is perfect competition.

It’s not controversial. Every businessman would agree. None want to work in a competitive market where they simply seek to outperform their competition. They want an advantage over some form of market power.

To be clear, such behavior can be beneficial as companies seek to lock in consumers. However, too much market power in our economy can cause a range of harms to many Australians and to our society. It is therefore a key role for the government to fight the instincts of Australian businesses and foster competition.

The most obvious detriment is rising prices, which occur particularly when supply is limited relative to demand. When supply is plentiful, the focus is on reducing wages and other supplier costs.

The share of profits in our national income has steadily increased since the 1970s; and as a result, the share of national income accruing to Australian workers has steadily declined.

The implications for inequality are clear. Most Australians derive most of their income from wages, not from dividends on the shares they own.

The lack of innovation in Australia as well as low productivity are also of concern. These problems will not be properly addressed until we recognize that high industrial concentration and the resulting lack of competitive pressure reduce incentives to invest and create new products. And it is more difficult for new entrants, often drivers of innovation, to establish themselves.

When I was at the ACCC, I said that Australia’s merger laws needed to be significantly strengthened. The ACCC has presented reform proposals for post-election consideration, which is now.

Unfortunately, it is very difficult to find evidence to convince our courts that companies will obtain market power by merging or, when these mergers take place, that the resulting market power will be used in a detrimental way. Indeed, the merger has not yet taken place and the courts often treat the business logic as mere theory.

We have also seen court cases in which attempts to protect the sale proceeds of a privatization by restricting competition to a then-monopoly have not been found to violate competition laws. This happened in a recent decision regarding the Port of Newcastle.

Under the terms of sale, if the port of Newcastle moves more than a certain level of containers, it must compensate its dominant competitor, Port Botany. Although it concluded that this arrangement was put in place to protect the proceeds from the sale of Port Botany, the court found that these arrangements did not constitute a substantial lessening of competition.

Now that the election is over, our merger laws and the effective operation of our competition laws must be debated.

There is also another role for the government here. We need laws that promote competition rather than protect existing big business.

Whether it’s landing slots at airports, access to limited telecommunications spectrum, laws that allow shipping companies carrying cargo to Australia to engage in collusive behavior, or the financial sector regulation that favors incumbents, to name just a few examples, we need governments to prioritize competition over the needs of industry incumbents.

Add to this the way governments privatize assets in a way that does not support competition, or as unregulated monopolies, so that they then receive high sales proceeds, knowing that the users of the privatized assets will therefore have to pay higher prices. It is an unfair form of stealth taxation that hurts most Australians and contributes to inequality.

Australia must adopt a pro-competitive mindset if we are to solve our low wage and productivity problems and, what should be a fundamental objective of economic policy, reduce inequality.

Rod Sims is Professor of Public Policy and Antitrust at ANU’s Crawford School and former Chairman of the Australian Competition and Consumer Commission.