Indeed, competition is always preferred to regulation. The ACCC’s view is, of course, that competition, or the threat of competition, is the best constraint on the market power of infrastructure operators. It is now common to hear that regulation of natural monopolies should be ‘light-handed’ and that some form of ‘price monitoring’ regime is best-practice in these circumstances.Īs I have said, the mantra that light-handed regulation means price monitoring is ill-conceived in economic theory and not working in practice. Price monitoring for monopolies is ill-conceived in theory and not working in practice In addition, and as requested by the organiser, I will make some brief comments on the calls made by the Harper Review and a few others, for the ACCC to be broken up, and for its regulatory functions to be separated out from the rest of the ACCC. Third, I will refer to the ACCC’s work with Australian governments to highlight the importance of privatising assets to promote competition, rather than just the sale price. Second, and related, I will argue that it is wrong to suggest that we should not be concerned about high monopoly pricing of infrastructure because the result is only a pure transfer of economic rent. I would like to suggest that the current interpretation of light-handed regulation of monopoly infrastructure, which in essence has come to mean price monitoring, is not only ill-conceived in economic theory, it has failed in practice. As I will explain today, I have always considered this to be true light handed regulation. Hilmer recognised that the regulation of monopoly infrastructure would require, at a minimum, the implementation of a negotiate / arbitrate framework. Today, I’d like to focus on three areas relevant to Australia’s infrastructure settings.įirst, I would like to call for a return to the approach to regulation of monopoly infrastructure envisaged by the Hilmer Committee. It recommended important and wide-ranging reforms in energy, water and transport. I was pleased that the Harper Review had a lot to say that is relevant to infrastructure. We see policies that prevent competition in coastal and liner shipping, inadequate dedicated rail freight paths, a poor policy framework for road investment, limits on supply and competition in urban water, extremely costly and loose past rules for energy network regulation, limits on infrastructure competition in many areas, and I could go on. Unfortunately, years of poor infrastructure policies and practices have limited the productivity of our infrastructure. And I’m particularly pleased to be discussing infrastructure policy this is an issue that I see to be of key importance to Australia’s competitiveness.Īustralia’s infrastructure is vitally important for our productivity and living standards, as we all know. It’s a pleasure to be here today in the company of many colleagues who have an interest in infrastructure.
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