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.