From food to energy, there is not enough competition in Australia Rod Sims

Tthe recent election campaign focused heavily on low wages and inequality. However, it does not focus on the main driver of these problems. If there were fewer markets in Australia run by dominant oligopolies and greater benefits from strong competition, we would have less inequality and higher wages and productivity.

Market economies rely on the forces of supply and demand that make up Adam Smith’s “invisible hand.” But this requires enough players on the supply side; without this, Australians will be poorly served by our market economy.

In my opinion, we obviously have inadequate competition in Australia. Think beer, groceries, mobile service providers, aviation, rail freight, banking, energy retail, internet search, mobile app stores and more.

Companies do not want markets where there is perfect competition.

This is not in dispute. Any businessman would agree. No one wants to work in a competitive market where they are simply trying to outperform their competitors. They want an advantage from some form of market power.

To be clear, such behavior can be beneficial as businesses seek to lock up consumers. However, too much market power in our economy can do a lot of damage to many Australians and our society. Therefore, a key role of government is to counter the instincts of corporate Australia and promote competition.

The most obvious damage is higher prices, which occur especially when supply is limited by demand. When supply is plentiful, the focus shifts to reducing suppliers’ wages and other costs.

The share of profits in our national income has been growing steadily since the 1970s; and accordingly, the share of national income going to workers in Australia is steadily declining.

The consequences of inequality are clear. Most Australians earn most of their income from wages rather than dividends on the shares they own.

There are also concerns about the lack of innovation in Australia, as well as low productivity. These problems will not be properly resolved until we realize that the high concentration of industry and the resulting lack of competitive pressure reduce the incentives to invest and create new products. And it is more difficult for new entrants, who often drive innovation, to establish themselves.

When I joined the ACCC, I said that Australian merger laws needed to be significantly strengthened. The ACCC has submitted proposals for post-election reform.

Unfortunately, there are significant difficulties in finding evidence to convince our courts that companies will gain market power through mergers or, when these mergers take place, that the resulting market power will be used in harmful ways. This is because the merger has not yet taken place and courts often view commercial logic as mere theory.

We have also seen lawsuits in which attempts to protect proceeds from sale from privatization by restricting competition to the then monopoly are not considered violations of competition law. This happened in a recent decision on the port of Newcastle.

Under the terms of the sale, if the port of Newcastle moves more than a certain level of containers, it must compensate for its dominant competitor Port Botany. Although it found that this agreement was introduced to protect the proceeds from the sale of Port Botany, the court found that these arrangements did not significantly reduce competition.

Once elections are far from the road, our merger laws and the effective operation of our competition laws need to be discussed.

There is another role of government here. We need laws that promote competition instead of protecting existing large companies.

Whether it’s airport landing slots, access to the scarce telecommunications spectrum, laws that allow shipping companies carrying cargo to Australia to engage in covert conduct, or financial sector regulation that favors incumbents to give just some examples, we need governments to prioritize competition for the needs of established industry.

Add to this how governments privatize assets in ways that do not support competition, or as unregulated monopolies, so that they then receive high sales revenues, knowing that consumers of privatized assets will have to pay higher prices as a result. . This is an unfair form of clandestine taxation that harms most Australians and contributes to inequality.

Australia needs to move to pro-competitive thinking if we want to tackle our problems with low wages and productivity and, which must be the main goal of economic policy, reduce inequality.

Rod Sims is a professor of public policy and antitrust at the Crawford School at ANU and a former chairman of the Australian Competition and Consumer Affairs Commission.

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