TRADE PRACTICES LEGISLATION AMENDMENT BILL 2003: Second Reading
Mr CADMAN (Mitchell) (10.47 a.m.) —I rise to speak on the Trade Practices Legislation Amendment Bill 2003. This is an interesting change to the trade practices legislation which has been proposed by the government.
It follows an examination of the Prices Surveillance Act 1983 and the ways in which the Australian Competition and Consumer Commission, or ACCC, is now entrusted with some of the responsibilities previously given to the Prices Surveillance Authority. The government called for an inquiry and, following that inquiry, set out to put into legislation some new objectives for the Trade Practices Commission. The proposals are contained in this legislation and it is not a straightforward piece of legislation.
The new part in the Trade Practices Act will have six changes. I will summarise these changes—and I must confess that I have had some help in this process. The first change is to have a clearly defined objective clause stating that the objective of prices inquiries and prices monitoring is to enhance economic efficiency. I think that is a great objective, because I saw it work when the Prices Surveillance Authority was trying to assess petrol price rises. As I remember the occasion, the oil companies went to the Prices Surveillance Authority—Caltex led the fray—with a proposed increase of 3c a litre. The Prices Surveillance Authority examined that at length and, after weeks of examination, decided that Caltex should have a 1c per litre increase in the price of petrol around Australia. Caltex left the hearings with a 1c a litre increase instead of the 3c a litre they had requested, and entered into a price cutting war, slashing prices by 3c a litre.
So it is impossible, in my opinion, to have a bureaucratic process that can really understand what is going on in private enterprise. The stricture that is sensibly included in this legislation is that the objective of pricing inquiries and monitoring is to enhance economic efficiency, and there is no other objective. I think that to try to control prices in the way that was done historically is fraught with danger. The second change in the legislation is to provide guidance to the relevant minister as to the circumstances in which an inquiry could be initiated. The role of the Trade Practices Act and the ACCC will be to let the minister of the relevant portfolio know whether or not they consider an inquiry ought to be held into the pricing structure of a particular industry or group. The third change is that the specifying of inquiries must be undertaken by an entity that is independent of the ACCC. The ACCC need not both specify and then examine. An external group or body or authority will be required to specify. Inquiries must be undertaken by an entity that is independent of the ACCC. [start page 22312]
The fourth change is to provide guidance on how an inquiry should be undertaken. The fifth change specifies that the reasons for an inquiry's recommendations be made publicly available—and quite rightly so. The sixth change provides for prices monitoring to be undertaken but imposes limitations on the way it is undertaken to ensure that it does not become a de facto form of price control. This government is not about price control. As I have indicated to the House, I have seen that in action and, frankly, it does not work. It is impossible for us to get to the root of the decision making of private enterprise—to draw aside the corporate veil and get behind the factors at work—so the only true way is to look at economic output, efficiency and competition and force the private sector into fierce competition.
I have noticed that the shadow Treasurer has been making a number of comments on this area. A press release on 2 October this year was entitled `When too much competition is never enough'. He also wrote a piece in the Australian on 20 August 2003. I have always found Mark Latham's writings interesting and have watched with interest his activity in Western Sydney—we both come from parts of Western Sydney—so I have read the press release entitled `When too much competition is never enough' and what he wrote about competition in the Australian. This relates very much to the act, as we are looking at competition in the Trade Practices Act. In the press release on 2 October, Mark Latham said:
Well, for starters, Labor believes in competition and productivity.
The Labor Party certainly was responsible for the introduction of the Trade Practices Act in its original form—it has changed over the years—so one would be inclined to agree with the proposal that Labor does agree with competition, except in practice, in government.
Both in the Whitlam government and in the Hawke government it never seemed to quite work that way, as favourites were played and the role of the union movement became dominant within the decision-making process. Competition factors out there in the marketplace between companies should be the role of private enterprise and should be monitored by the ACCC—if necessary, with prices surveillance and inquiries. That can be absolutely corrupted by the fact that you have a favoured player entering from the side, and that would be the ACTU or the union movement at large. In both of those regimes competition in private enterprise was supposed to go ahead, but in fact it was corrupted and spoiled by the dominance of the ACTU and the labour movement in the centre of the cabinet. So it does not matter what you have in the Trade Practices Act; it is not possible to have that competition and productivity at work if the union movement is active. [start page 22313]
I notice some figures that show that, during the three years that Labor was in government in the seventies, the number of public servants increased by 12.6 per cent, but employment in private industry for the same period increased by just 1.2 per cent, so it was Public Service generated employment in those days. Productivity was extremely low but inflation was high—therefore the competition that the shadow Treasurer speaks about was not evident. We were not winning the markets that we needed to win. In fact, our deficits increased because we just could not export enough.
The shadow Treasurer—for those who believe in fair trading and an open economy—believes that the abandonment of competition policy by the current government is a flaw that people should take note of. We can test that because competition is something that this government is proud of. Our expanding trade opportunities are all based on a competitive economy and a competitive labour market. Products of all types are now finding niches around the world. That is something that I believe the three regimes of Whitlam, Hawke and Keating were not able to achieve. It pays to have a bit of a reality check as to whether some of these statements are founded in fact or in fiction. In certain instances it is time to examine whether some of the factors at work can really produce the results of the competitive environment that we need to have, as founded in the Trade Practices Act and as administered by the ACCC—the Australian Competition and Consumer Commission.
For instance—and nothing could be worse for the competitiveness of Australia than this sort of thing—on one occasion in the House, when Jim Cairns was Treasurer, somebody said, `If printing money is a good solution to unemployment, why don't you just print a lot more money?' Cairns said, `Well, we might just do that.' That was mirrored, in fact, in later years by the high inflation and high unemployment that Paul Keating brought to Australia. That was not a competitive environment in which Australia could compete in the world markets. We suffered from those periods of high inflation and high unemployment by losing trust around the world—losing the confidence of our partners. In fact, we lost the opportunity to export and, therefore, our budget, and the balance of payments suffered to a point where Australia became a basket case. I remember that on two occasions—once during the Keating Treasury period and once during the Whitlam period—the IMF investigated Australia and issued warnings about the precarious nature of our economy and where we were heading as a country. The quote, as I remember it, from the IMF in July 1975 was: `The origins of the Australian recession are to be found in the domestic developments.' That was purely government inspired.
If Mark Latham, the member for Werriwa, is serious about the competition that he claims that the Labor Party wants to espouse, it is changes to legislation such as these before the House that will engender that process where you are dealing with sensible principles underlying the decision-making process that you want the ACCC to adopt. You are not imposing a prices surveillance authority which does not work but are modifying the role of the ACCC towards principles which give clearly defined objectives stating that prices inquiries and prices monitoring must really enhance the economy. That is what it is all about; it is not playing favourites because somebody does not like a price hike.
Whitlam is canonised by the Australian Labor Party but they would do well to remember some of the things that he entered into during the period of his government. I wonder whether people remember that, in order to take control of impending inflation of 12.5 per cent at that time, he introduced a 25 per cent across the board tariff cut. That was supposed to reduce prices and increase competition but the savageness of that decision in fact did not increase competition; it put people out of work because the shock of the change was too much for Australian industry to accept. Compare that with the role that this government has adopted: gradually reducing protection across the board at a pace that Australian industry can absorb and handle, without distortion of and disruption to the workplace, to continue to grow the level of employment in Australia and the competitive nature that Australia needs to exhibit to keep winning markets. [start page 22314]
The Trade Practices Act as amended is a great example of the differences in the way in which the two philosophies interact with industry: the careful adjustment, in this instance, with changes getting rid of the Prices Surveillance Authority and putting some sensible principles in place—as guidance for the ACCC and for Graeme Samuel, who heads it, to follow—compared with the Australian Labor Party legislating to stop price rises and all of those weird economic decisions that really need to be watched. It has only been within the last few days that I understand Labor's Senate leader, John Faulkner—who interviewed Gough Whitlam—has been described by a commentator as the `custodian' of the Labor Party's historical legacy. Man alive, I wouldn't want that in a fit! Surely Faulkner would want to run from that. He really should do so. He should disavow that title because the fact of the matter is that the tradition of competition and the tradition of a sound economy are certainly not to be found in the Whitlam era; only rack and ruin are found there, and in the Keating era, for that matter.
The member for Werriwa says that there is nothing like competition when talking about these types of measures and espouses too much competition as never being enough, and then on 20 August this year, in an article on the same sorts of concepts, he espouses tradition and says that it really leads to a conclusion that is a better outcome than we have at the moment. All that is just based on falsity. Fact is not there; it is a fantasy. Also, for Senator Faulkner to seize the title of custodian of the party's historical legacy, as being the individual around whom all that is focused, is a tragedy. The economy when Whitlam came to power was bubbling along with an unemployment rate of 2.4 per cent and inflation of 4.5 per cent. Inflation soared to 28 per cent under Whitlam. Then under Keating the whole thing was repeated once more but at a slower pace.
The shadow Treasurer talks about Labor's commitment to private sector competition and claims that the trade practices law, lower tariffs, financial reform and new markets in energy and communications are all Labor initiatives—but it is not so. They took some initiatives, some worthy and some unworthy, but in practice they ignored much of their good reform. Consider their decisions on employment, their decision on favouritism to unions and the results in high interest rates and high inflation. The consumer price index jumped 8.2 per cent in the first six months of the Whitlam period. That is a pretty powerful disincentive for people to buy and save! I trust that the shadow Treasurer means what he says, but I would be suspicious of Labor's capacity to deliver more competition, as he claims they will, because in practice it has never been that way. In practice they have produced extraordinary results. Despite the warnings of everybody, Labor went gung-ho ahead and did things that produced disaster. [start page 22315]
The shadow Treasurer, in one part of his speech, says:
Competitive pressures help companies to upgrade their technology, expand their markets and lower their prices. They also help to level the playing field, exposing the indulgences of big business and giving smaller players the chance of market entry. That is why I am unequivocally pro-competition.
That sounds nice and it could have come from a Liberal Treasurer, because it is true. But the fact of the matter is that small businesses went out backwards, large businesses put off people—at the height of the Whitlam and Keating eras mass sackings and unemployment were high—large companies struggled and small companies were liquidated. So I would have to say that if one looks at the record of Labor in government one cannot believe that competition is a serious objective. One would have to say that increasing payments as directed by the union movement, high inflation, high unemployment and high interest rates are just the order of the day. I give the member for Werriwa credit: those are good intentions of the shadow Treasurer, but he will never achieve them. The fact is that his party will not let him and the fact is that what the Australian Labor Party should be doing is supporting some of the sensible changes that have produced results and got runs on the board. (Time expired)
Author: Alan Cadman MP
Source: House Hansard - 6th November 2003
Release Date: 2 Jan 2004