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Deregulation and National Competition Policy and its Effect on Rural and Regional Areas

Deregulation and National Competition Policy and its Effect on Rural and Regional Areas

Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion.
Briefing Paper No. 07/2001 by Stewart Smith

National Competition Policy (NCP) is an element of micro-economic reform that has had an impact on all sectors of the economy and community. This Paper briefly traces the history of deregulation in Australia and the development of national competition policy. Reviews of NCP by the Productivity Commission and the Australian Senate are presented. A case study of the deregulation of the dairy farming industry is presented as an example of the effects of deregulation and the introduction of national competition policy.

In 1992, the Council of Australian Governments commissioned Professor Fred Hilmer to undertake an "Independent Committee of Inquiry into National Competition Policy". The subsequent report, known as the Hilmer Report, was released in August 1993. Acting on the Hilmer Report's recommendations, a number of reforms were drawn together in 1995 to form a package, agreed upon by all Australian Governments, and called National Competition Policy (pages 1- 4).

A review of NCP by the Productivity Commission concluded that NCP is just one element of micro-economic reform which is changing the social and economic structure of rural and regional Australia. Across NSW, NCP reforms are predicted by the Productivity Commission to increase gross regional product by 2.6 percent and employment by 0.1 percent. However, employment decreases are expected from NCP reforms in all NSW regions bar the Hunter - Sydney - Illawarra corridor and the Far West (pages 8-16).

The Senate Select Committee on the Socio-economic Consequences of the NCP found that the cumulative effects of changing technology, micro-economic reform and the globalisation of the economy were creating significant social pressures. NCP could not be isolated and 'blamed' for the problems facing rural and regional Australia (pages16 - 18). However the Senate Committee did conclude that the failure to properly apply the 'public interest test' of NCP is at the heart of its problems in rural areas (page 18-20).

The NSW dairy industry is presented as a case study on the effects of deregulation and the implementation of NCP reforms. The dairy industry has moved from being in an intensively regulated environment to one of deregulation, and is currently in a state of adjustment. Deregulation has led to a severe drop in dairy farm incomes and negative impacts on both industry participants and their surrounding communities (pages 22-33).

It is evident throughout this Paper that national competition policy, and micro-economic reform more generally, have created both winners and losers. One of the major problems is that, whilst the benefits of NCP are generally longer-term and spread more widely amongst the community, the costs of change are often concentrated in a particular area and borne immediately. Ultimately, how society compensates and supports those affected by NCP reforms is a key issue yet to be satisfactorily resolved.