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Quiggin, J. (1998), 'National Competition Policy and Human Services', Northern Radius 5(3), 3-4.

Date created: 20 April 1998

Last modified: 20 April 1998

Maintained by: John Quiggin

National Competition Policy, also known as 'Hilmer and related reforms' was introduced in 1995, as a result of the meeting of the Council of Australian Governments (COAG). This meeting resulted in the passage through all Australian parliaments of legislation which fundamentally affected all aspects of Australian life, from the opening hours of shops to the employment conditions of workers. Yet until 1998, the majority of Australians had never heard of National Competition Policy and only a tiny minority were aware of what the policy involved. This situation changed dramatically with the 1998 Queensland election, where the vote for the One Nation Party was attributed, in large measure, to resentment at the perceived effects of National Competition Policy. Whereas advocates of National Competition Policy claimed it would be worth $1500 per year to every Australian households (industry Commission 1995), critics blamed the Policy for everything from unemployment to the decline of country towns.

The Hilmer Committee was appointed in 1992 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's Report (Hilmer et al 1993) was issued in 1993. Advocates of reform within Federal government policy circles used the Hilmer Report as the basis for a renewed push for public sector reform, centred around the COAG. By virtue of its reliance on inter-governmental negotiations and remoteness from open political debate, the COAG process permitted further extensions of the reform process to be presented as a fait accompli, embodied in the Competition Policy Reform Act, and the associated Competition Principles Agreement.

The impact of National Competition Policy has been felt primarily within the public sector, and to a lesser extent in some areas of small business. By contrast, National Competition Policy has proved almost entirely ineffectual in preventing the drift towards duopoly in most sectors of big business. The projected rationalisation of the 'Big Four' banks into a 'Big Two', which would also dominate the insurance industry and, in due course, the superannuation industry, is merely the latest example of the incapacity of National Competition Policy to produce competition.

In the public sector, however, the demand for a 'level playing field', backed up by the power of National Competition Policy, has proved a potent weapon in the hands of those seeking to replace traditional conceptions of public service with a combination of generic managerialism and pseudo-market calculation. Arguments in favour of 'purchaser-provider' splits, 'customer focus' and so on, can now be backed up by the threat of financial penalties imposed on state and local governments that fail to demonstrate adequate progress towards 'reform'.

The central 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.

Although the public benefit test is specified in very broad terms, incorporating a range of equity and environmental objectives, its application has been much narrower. Where government bodies have been commercialised or corporatised in line with the ethos of competition, the application of the public benefit test has been perfunctory, in some cases amounting to little more than a rubber stamp from a consultant.

Where the public benefit test has been applied in earnest by the National Competition Council, the scope of the test has been narrowed so that concerns other than those of economic 'efficiency' are given short shrift. The exclusion of non-economic concerns from the public benefit test has been advocated most strongly by the Industry Commission (1997).

The Hilmer report dealt primarily with the activities of government business enterprises operating in the market sector of the economy. There was therefore, little or no discussion of the issues associated with the application of competition policy to services such as health, education and welfare which are commonly provided by public or non-profit institutions on a non-commercial basis or by profit-making enterprises receiving subsidies such that prices do not reflect the cost of provision.

Hilmer himself has expressed concern that the principles set out in the Hilmer report have been applied, inappropriately, to health, education and welfare services. This concern is well-founded, in that the scope of the Competition Policy Reform Act is essentially unlimited. In addition to the direct effects of National Competition Policy, the health and education sectors have been subject to extensive 'reform' based on the assumption that a combination of managerialism and market competition is the best way to secure efficient provision.

Competition policy is based on the theoretical assumption of consumer sovereignty, that is, that consumers are the best judges of their own interests in both the short and long run, and on the practical assumption that comparisons of 'like with like' can be made so as to ensure a 'level playing field'. Neither of these assumptions is, in general, valid with respect to health, education and welfare services.

Attempts to apply pseudo-market principles in community services have produced highly unsatisfactory outcomes wherever they have been applied in Australia and overseas. Easton (1997) gives an excellent account of the failure of reforms of the New Zealand health system based on managerialism and competitive principles such as the purchaser-provider split.

The reaction against National Competition Policy provides an opportunity to turn back the free-market push, and to defend values of service and professionalism against the ideology of self-interest and managerialism. This will help to protect the community services sector against the worst excesses of economic rationalism. However, the deeper problems of inadequate resources to meet growing needs will be met only when the community is prepared to pay higher taxes in return for improved services.

References

Easton, B. (1997), The Commercialisation of New Zealand, Auckland University Press, Auckland.

Hilmer, F., Rayner, M., and Taperell, G. (1993), National Competition Policy, Report by the Independent Committee of Inquiry

Industry Commission (1995), The growth and revenue implications of Hilmer and related reforms, AGPS, Canberra.

Industry Commission (1997), Submission to the National Competition Council on the National Access Regime: a draft guide to Part IIIA of the Trade Practices Act , AGPS, Canberra.

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