After being stuck in limbo under messrs Tony Abbott and Joe Hockey, Prime Minister Malcolm Turnbull and Treasurer Scott Morrison are reportedly looking to launch an “enthusiastic response” to the Harper competition policy review’s final recommendations. From The Canberra Times:
It means long-standing monopoly-power held by existing taxi services could be broken up, and traditional retail hours loosened dramatically, while road transport regulations could be significantly modernised.
It also means laws governing where pharmacies can be located will be reconsidered, as will aggressively competitive behaviour from big businesses looking to expand.
Treasurer Scott Morrison says the Harper review has the potential to unlock “enormous opportunities” for the economy and Australians can expect an enthusiastic response to it from the Turnbull government…
On Friday, Mr Morrison said the review was an “outstanding report” and he would like to put it back on the federal political agenda over the next few weeks.
This is good news.
Central to the final report of the Harper competition policy review, released in April, were recommendations that the government free-up rules preventing competition in the the pharmacy and taxi industries, as well as in the delivery of urban land supply.
On pharmacies, the Harper review specifically recommended dumping pharmacy location and ownership rules, replacing them with “regulations to ensure access to medicines and quality of advice regarding their use that do not unduly restrict competition”.
Like the Harper review, the Productivity Commission has for more than a decade pushed for changes to pharmacy ownership rules to enable pharmaceutical products to be sold in supermarkets (amongst other places), and has described the current restricted arrangements as adding “to health care costs for little apparent benefit”.
Similarly, last year’s Commission of Audit recommended the pharmacy sector be opened to competition through the deregulation of location and ownership rules.
On taxis, the Harper final report argued that the scarcity of taxi licences had led to a situation where “significant economic rents accrue to owners of taxi licences”, meaning that “15 to 20 per cent of the taxi fare arises as a result of restrictions on the number of licences”, which in particular harms “a significant number of lower-income earners, many of whom have limited transport options on account of their age or disabilities”.
The review claimed that “taxi industry reform in most States and Territories is long overdue” and recommended that “the regulatory framework for taxi regulation… be enhanced considerably through independent regulators having the power to make determinations (rather than recommendations), including on the number and type of taxi licences to be issued”, along with the implementation of “flexible” and “consumer-focused” regulation of mobile technologies – such as ridesharing – that does “not inhibit innovation or protect existing business models”.
The Harper final report also slammed Australia’s anti-competitive planning regime, noting that “land use restrictions can pose considerable barriers to effective competition by constraining the supply of urban land, concentrating market power and creating barriers to entry for new businesses”, and “can confer significant negotiating power on established landlords and restrict commercial opportunities for others”.
Accordingly, the review recommended that state and territory governments should “subject restrictions on competition in planning and zoning rules to the public interest test, such that the rules should not restrict competition unless it can be demonstrated that the benefits of the restriction to the community as a whole outweigh the costs, and the objectives of the rules can only be achieved by restricting competition”.
The Harper review also recommended replacing Australia’s current road charging system (fuel excise and rego) with more direct road charges in a revenue-neutral manner so that there is no additional impost on road users. A user-pays system, it argues, is necessary to reduce congestion on our roads and improve productivity into the future.
While the Coalition’s new-found fondness of the Harper competition review is welcome, it has come too late with respect to pharmacies. In May, the Abbott Government ignored the advice of the Harper Review, the Productivity Commission, and the Commission of Audit and instead extended the rules restricting new pharmacies from opening near existing pharmacies for another five years, along with doubling funding for pharmacists to deliver services to patients.
Pharmacies aside, the Turnbull Government would do well to adopt the Harper review’s recommendations, work with the states to implement the reforms, and help to improve the competitiveness of the Australian economy.
