Over the last decade, productivity growth has slowed across all Australian jurisdictions. This is significant, as productivity growth is the key driver of economic growth and living standards.
Competition policy is a critical driver of productivity and economic growth. Government policies which support competitive markets are fundamental to enhancing productivity. They ensure that the economy is open to trade and investment and that entry and exit barriers in markets are as low as possible.
Competition policy is a key arm of economic policy, falling under the portfolio responsibility of the Treasurer. Accordingly, NSW Treasury plays a key role in advising on matters affecting competition in the economy, competition issues affecting government, and in developing whole-of-government submissions to inquiries such as the recent Australian Government competition policy review (the Harper Review).
Australian Government’s Competition Policy Review (the Harper Review)
In December 2013, the Federal Government announced it would commission a comprehensive review of Australia’s’ competition laws and policy; the first in more than 20 years. The Competition Policy Review Panel led by Ian Harper released its Final Report on 31 March 2015 and highlighted important reforms that can boost productivity and growth. The report made 52 recommendations in the areas of competition policy, law and institutions.
The NSW Government made two submissions to the review – in June 2014 in response to the Review’s Issues Paper and in November 2014 in response to the Draft Report. NSW Treasury played a key role in the development of the NSW Government submissions to the Review, working with DPC and Agencies.
In December 2016, the NSW Premier signed the Intergovernmental Agreement (IGA) on Competition and Productivity-enhancing reforms, along with the Governments of Australia, Western Australia, Tasmania, the Australian Capital Territory and the Northern Territory.
The next stage is for jurisdictions to work together in 2017 to develop reforms under each of the four National Partnership Agreements (NPAs) – in the areas of regulatory reform, human services, infrastructure and additional productivity reforms. NSW Treasury is taking a proactive role in the interjurisdictional working group developing these Agreements.
Competitive neutrality policy
Two important policy levers the NSW Government can use to help promote competitive outcomes in the state are the application of competitive neutrality policy and the operation of its procurement policy.
In February 2006, COAG signed the Competition and Infrastructure Reform Agreement (CIRA). Under Clause 6.1 the parties agreed to “enhance the application of competitive neutrality principles to government business enterprises engaged in significant business activities in competition with the private sector".
The competitive neutrality principles aim to promote efficient competition between public and private businesses. Specifically, they seek to ensure that government businesses do not enjoy competitive advantages over their private sector competitors by virtue of their public sector ownership.
The Government has assigned to IPART partial responsibility for investigating and reporting on Competitive Neutrality complaints. Read more about this on the IPART website.
NSW procurement policy
State Governments are responsible for procuring goods and services on behalf of the public. Policies that create distortions in competitive markets will detract from productivity growth. The promotion of competition is a key consideration in the procurement activities of NSW Government Agencies.
The NSW Government Procurement Policy Framework sets out the policy and operating framework for the NSW public sector procurement system, and provides a single source of guidance on the rules for procurement.
As outlined in the policy (see page 11 of the framework document), a key objective of the NSW Government is to improve procurement outcomes through enhanced competition, as well as facilitating access to government procurement business by the private sector, especially subject matter experts and regional based enterprises.