24 November 2015
Transcript - #2015053, 2015

Joint press conference, Canberra

SUBJECTS: urnbull Government’s response to the Competition Policy Review [Harper Review] - Promoting more choice, better services, stronger growth; Bill Shorten’s cigarette tax

TREASURER:

Thank you for joining us, I'm very pleased that I am joined here today by Professor Ian Harper for this announcement of the Government's response to the competition policy review, which will be launched today. The copies will be distributed today. Today is a day where you heard the Prime Minister focus fairly and squarely on what the Government is doing to protect our national security, and I want to commend him for that statement. But at the same time, we are always working to realise our economic opportunity. This is a Government that is working night and day on both of these core objectives to ensure that we can have the strong economy and a strong and cohesive society that all Australians aspire to. I want to thank Professor Harper for taking the time to be with us here today for this formal response to his review. But I also want to thank him once again and his fellow panel members, Peter Anderson, Michael O'Bryan and Sue McCluskey for the outstanding work that they have done in bringing together their report that was provided to Government in March of this year.

Increasing choice and delivering better services for consumers is central to the Turnbull Government's plan for driving growth and jobs in our economy, and it is also central to our response to the Harper Review. Our response is all about more choice, better services and stronger economic growth. On coming to office, the Coalition Government fulfilled its election pledge to commission the first root and branch review of Australia's competition laws in 20 years. In response, the Harper Review, led of course by Professor Harper, set out what I'd describe as a new frontier for Governments at all levels to lead a new phase of change that will deliver better services and more choices for Australians that in turn will help to drive growth and jobs in our economy and support the higher living standards that result from those efforts.

Our response to the Harper Review today sets out a productivity and competition agenda for the Turnbull Government that combined with our efforts to create a better tax system, boost innovation, open up new markets, strengthen our budget, and achieve real improvements to how we run our federation, amongst the many other initiatives that you've heard me refer to, this will see Australia prosper in the years ahead.

Now, post the peak in the commodity prices and the mining investments and our terms of trade, we cannot rely on those factors moving forward to support the incomes and living standards that Australians seek. Prior to the mining boom multi factor productivity in the non-mining sector grew in the economy at an average annual rate of around 1.5 per cent. Now, during the past ten years, it grew at just 0.4 per cent. Moving forward our economic success will depend more critically on our success in driving productivity gains, in the public and private sphere alike, and how we transition and diversify our economy. The Australian people know this, and they are already about this task. We are already seeing the benefits emerge and the changes emerge, especially in our service industries and, in particular, in the area of social and human services that have been a keen focus of Professor Harper and his panel's review.

In the past 15 years health and social services have increased their share of employment in our economy from 9.4 per cent to 13 per cent. This represented a growth rate of some 4 per cent, more than twice the growth in employment in all sectors. At the same time, manufacturing employment has fallen from 12 per cent to 7.5 per cent. In States like South Australia, the growth for social and human services has been even more pronounced, lifting from around 10 per cent to 14.5 per cent, while in manufacturing in that state it has fallen from just under 14.5 per cent down to just under 9.

So, there is a transformation taking place in our economy and Professor Harper's review, I think, has seized very much on understanding those transitions and where the growth and opportunities are for our future. But we cannot continue to succeed as we are if we just stand still. The Hilmer Review in 1993 built a decade of pro-competitive reforms through the national competition policy. Consumers benefitted through better, more efficient, competitive and innovative markets, such was the impact that by 2005 the Productivity Commission reported efficiency improvements in key infrastructure sectors in the 1990s, to which competition reforms directly contributed, increased Australia's GDP by 2.5 per cent. As a Government, we intend to build on that legacy and we intend to reboot competition policy in order to drive productivity in the country.

The Government will embrace the Harper Review recommendations by specifically supporting in whole or in part 44 of the 56 recommendations, and we will remain open to the remaining 12 recommendations depending on the outcome of further review and consultation with the states and territories and other stakeholders. So, we have rejected not one recommendation in this report, we have seen merit in all of the recommendations in this report, as we do think it provides an excellent blueprint. Now, there are various issues that are subject of existing processes that have been picked up over the last few months and beyond and they will continue. But I should stress that we look very favourably on this report. We have already announced reform in areas consistent with the Harper Review, such as simplifying the regulation of coastal trading, tasking the Productivity Commission with a back to basics review of intellectual property laws and reviewing remuneration and location rules in the pharmacy sector that were contained in the Pharmacy Agreement. We'll expand our regulatory reform agenda and response to incorporate a competition regulation review. This is a powerful way to strengthen Australia's competitiveness by systematically reducing barriers to competition.

If we deliver greater choice and give a boost to our economy all levels of Government – state and territory and indeed local – must be involved in this process of responding to this report. To that end, I’m already working with my state and territory colleagues to develop a new national framework for competition reform.

Many areas that are highlighted in the report are areas of shared responsibility; roads, human services but particularly for states retail trading hours, taxis and things of that nature. Critical areas like planning and zoning where reform can deliver real benefits, making our cities more liveable, letting Australian business people that want to set up new businesses, enable them to do that and back themselves and to be able to compete on their merits.

I'd highlight the issues of cities that the Prime Minister and Minister Briggs are so focused on, with a service economy, and we have seen this in the recent data, with the strength out of particularly Sydney and Melbourne, the performances of our cities as economic units in the future from a more services based economy is vital to our economic future.

The Harper Review makes a strong case for putting users at the heart of service delivery, by giving them greater control over the services they use, and who provides them. Professor Harper has a wonderful example of the Joondalup hospital as a way that can be achieved. Here the Government will help lay the path for reform by asking the Productivity Commission to take stock of what has worked already and make practical recommendations to empower consumer choice.

We also want to work with the states and territories to promote sound and efficient investment decisions when it comes to roads and this will put them in tandem with other infrastructure sectors and help us to better meet the needs of users.

To support this new competition reform agenda the Government has supported the recommendation to put in place a new institutional structure with the states and territories, which will include the potential for productivity payments for delivery of reforms.

The process that I'm speaking about is inextricably linked to the discussion that we are already having with the states in relation to creating a better tax system, and ensuring a much better federation. This will be the subject of further discussion when state Treasurers meet in the not too distant future as well as at COAG. Under the previous National Competition Policy the Commonwealth made incentive payments to states and territories, that did drive reforms, however, there were many lessons from that process, and as a Government together with the states and territories we will seek to incorporate in the new mechanism the lessons from that process to ensure that we are paying on delivery – not just on a promise.

We are also taking forward a significant package of competition law reforms as part of this we will be streamlining the process for firms seeking to merge to remove unnecessary restrictions and requirements that may have deterred their use. As well, we'll remove industry specific pricing laws and instead outlaw the kinds of concerted practices amongst competitors that substantially undermine competition, similar to the approach taken internationally. And we'll simplify the authorisation and notification provisions meaning that only one application is required for a single business transaction or agreement.

Now, in relation to Section 46 where there has been a keen level of interest, both within this building and without, the Government does acknowledge the concerns about the operation of the misuse of market power provisions in the Competition and Consumer Act and a need to ensure these provisions are enhanced rather than inhibit competition.

I particularly want to commend the work of the former Minister for Small Business, the Honourable Bruce Billson, for his very strong advocacy on this issue, and laying out the arguments and the case for change. This role has been enthusiastically embraced by the new Assistant Treasurer and Minister For Small Business, Kelly O'Dwyer, who has taken on that role.

So, what we will be doing in relation to section 46 is we will be proceeding with a discussion paper in response to further pursuing that particular recommendation, which is recommendation 30. We note the Harper Review's recommendation for change and we will be embarking on this further round of consultation with the release of that discussion paper in the next few weeks. This will canvass a spectrum of more specific options for change beyond the proposition currently before the Government. This debate currently is quite binary, it's either the full Harper or the no Harper, and there are a range of points that exist between those two options, which address the core of the problem which we are seeking to address, which is the inability of the current provisions to do the job that we believe they should be doing.

So, that is a case for change, but we need to do more work and consult more specifically. The Harper Review canvassed a broad range of issues, 56 recommendations, but this was one recommendation that the Government specifically will consult on further, comments will be due back on that by February 12 and the Government will make a decision on this and I'll take a recommendation to the Cabinet in March. I acknowledge it's an issue in which many people have strong views and I encourage people to engage in the consultation process so we can find the best way forward.

Reforming competition is one of the best options we have to boost growth and productivity and jobs in the years ahead and so I thank Professor Harper very much for his report and the outstanding work that has been done. I'm pleased we have been able to bring the vast bulk of the recommendations that previously hadn't received as much attention as section 46 and put them centre stage in what will be an important economic reform agenda for the country.

Professor Harper?

PROFESSOR IAN HARPER:

Thank you, Treasurer. Treasurer, I speak on behalf of my colleagues on the panel when I say what a privilege it was to be asked by the Government to prepare this report. As you say, Treasurer, these are very important issues for our country. Today on behalf of my colleagues I welcome the Government's response to this work. It was a year of our work, a year of our lives, I should say. For the Government to have accepted in full, in part and then to remain open to all of our recommendations, is a terrific outcome from our perspective. So on behalf of my colleagues on the panel, thank you, Treasurer, for giving us this opportunity to serve and we look forward to the Governments implementing the recommendations as proposed.

QUESTION:

Why is there so much push-back from within the Government to recommendation number 30?

TREASURER:

Well, there isn't. What's the basis of your suggestion?

QUESTION:

Well, you have picked up 54 but you seem reluctant to pick this up and there were reports that especially when Bruce Billson was Minister, that there was a fairly lively discussion [inaudible].

TREASURER:

It's a complex issue, Paul, and complex issues require much work to, I think, arrive at the right outcome. The Government isn't going to rush into anything here, it has been some time, I know that we have been looking at this issue and since I've come into the role of Treasurer it's my judgment that further work is required to make sure we get it right.

QUESTION:

Big business versus small business?

TREASURER:

This is the problem that people couch this issue in those terms. Something that Professor Harper has schooled me in well, in my last few months, is that competition is actually about consumers, it's about how much choices they have, not how many competitors there are. If you put the consumer at the top of the tree that is the ultimate test about how competition reforms are working in this country. So, it's about what's best for consumers, and there are a range of complex legal arguments that go around section 46, but my purpose today is to make the point that that is an important issue – there is no doubt about that – but the other 55 recommendations are critical to the functioning of our economy, particularly whether it's in health and social services, and the opportunities that are there, in planning and zoning reforms, retail trading hours, all of these things, the unfinished business in energy markets, water, and so on, there is a lot in this report. That's what's going to drive economic jobs and growth, not technical arguments in a lawyer's picnic about section 46.

QUESTION:

Just on retail trading hours, how keen are you to see states like South Australia and WA, which still have fairly restrictive laws, change them. Is that an area where states could possibly expect compensation payments [inaudible]?

TREASURER:

The report makes clear that the competition process and the potential for productivity payments would encompass these types of reforms. But whatever states choose to go and embark on is a matter for them. This will not be a prescriptive approach from the Commonwealth. All the state Treasurers that I deal with regularly are very conscious, I believe, of the economic challenges they have in their own states. If they wish to pick up reforms and run with them that will boost their own economies and grow jobs, well, this process will, I think, reward them. If they choose not to do that, I suspect their electors won't.

QUESTION:

Mr Morrison, what are the budgetary implications of the incentive payments, where will that come from, do you have any idea what they might be and is there a prospect that this could be linked to tax reform further down the track?

TREASURER:

I already have linked it to the issue of changes to the tax system, potentially, but that is not the only way that that can be addressed. That is not necessarily confined to what may happen in relation to the issues that have been raised with us by the states and territories on tax, namely, in relation to consumption taxes. We have, we are working through, as everyone knows, a raft of options when it relates to taxes, including at the Federal level in isolation. That said, as Professor Harper might want to comment, the whole point of engaging these reforms is it lifts growth and as you lift growth you lift earnings, which means you lift revenue. And so it's win-win.

HARPER:

There's a fiscal dividend for these reforms, they raise productivity, they raise growth – therefore the Budget comes back into balance, automatically as a result of that. There are benefits also for the States, so there's a pool of money which is created as a result of the reforms themselves, even before you get the tax reform.

QUESTION:

Just to be clear, nothing in the idea of incentive payments will affect the Budget bottom line or deteriorate the bottom line.

TREASURER:

I would not think so in the way that we would seek to develop this. But it's a very early stage, David. The next step, is we have got a meeting of state and territory Treasurers. I canvassed the Harper Report at the last meeting, it was one of the first things I put on the agenda, and I was quite enthused by the nature of the response from Treasurers to engage with this. So, the next step is to work out the mechanism by which this can be done, and importantly, the institutional vehicle. Professor Harper makes some recommendations about a new vehicle that can achieve that. I think a shared ownership of that between the states and territories, jurisdictionally, and the Commonwealth, is very important to get the buy-in. I think that will be very important. That's the next step of the process, so we'll take it to the next level.

QUESTION:

Just on another issue, the list of companies that's been kicking around that aren't required to file to ASIC, what's the reason for keeping that and would the Government consider getting rid of it?

TREASURER:

We are currently looking at changes that were brought back to us from the Senate, that was on a completely unrelated Bill, I note, and there are some issues around disclosure there that we are looking at closely at the moment and when that Bill goes back to the Senate, I envisage we might be making some amendments there.

QUESTION:

On cigarette taxes, can I get your thoughts on what Labor's announced, is that something that's on the table as you look at more options?

TREASURER:

On their ciggies tax? I might make a few more responses to that later in the day. But what we are really seeing from Labor, I think, when it comes to these issues – and I don't really want to draw Professor Harper into this sort of political commentary, that's not the purpose of today's presentation – is that when it comes to tax reform, they have a very small appetite – a very small appetite and a very inconsistent appetite. They are fringe dwellers when it comes to the issue of economic change and reform in this country. In the year of the ideas – he's barely managed a bubble.

QUESTION:

Professor Harper, what is your response to the effects test being pushed back until next year, are you worried that your idea is going to be watered down and will never see the light of day, and then Mr Morrison can you talk about the parallel restrictions on books because that caused a lot of difficulties for Labor, Australian writers said that we won’t have Australian [inaudible]?

HARPER:

I think there's no surprise that section 46 was the most controversial aspect of the report. You'll see that in the submissions, both to the draft report and to the final report. It was one of the only recommendations that we actually changed between the draft report and the final, acknowledging the difficulty of the issues, and the heartfelt views expressed to us. The fact that the Government would take that issue and deal with it separately strikes me as perfectly reasonable. In fact I made the point publically, the most important recommendation from the perspective of driving productivity in our country, is the reforms to human services – 46 is important, but it's not the major game. So, for the Government to consider that separately strikes me as perfectly reasonable.

TREASURER:

On the issue of books, yes it has been a long standing issue and the Government has clearly made its view known in terms of our response to this review, but we also note that there is a Productivity Commission inquiry into these arrangements which still has a distance to run, and any action in relation to this issue will await the outcome of that inquiry, which I think will better inform on things like transitional arrangements, mitigations, these sorts of things which will no doubt be raised. We'll get – we've made it very clear what our direction is we want to head in, but we don't want to second guess the Productivity Commission's more specific recommendations and I think that will provide a better guide. But it also provides the opportunity for the industry to continue to engage in the best way to go forward.

QUESTION:

The West Australian Police Commissioner has raised concerns, he wants pay pass and other wave technologies banned because he says there's been an increase in theft at small card levels. What do you think of that sort of suggestion of an outright ban on Paypass? It's absolutely legitimate.

TREASURER:

Well, I'm happy to look at what he's proposed, and he can forward that to the Government and he can outline his concerns on those issues and he can raise that particularly, I think, through Minister Keenan, who would have more direct first line response to these issues and then we can go from there.

QUESTION:

In the draft report, before the final Harper, it said that they should avoid appointing individual Commissioners at the ACCC, but in the Agricultural White Paper moved to implement an Agricultural Commissioner, in the Government's response to the Harper Competition Review will the Agricultural Commissioner still be appointed and when we will see that happen?

TREASURER:

Yes, that's still in train, but yes.

QUESTION:

Yes, and Professor Harper, do you have any issues with an Agricultural Commissioner going forward?

HARPER:

That wasn't a recommendation of the final report, it's a matter for the Government. The Government took that particular recommendation and accepted it in part. We recommended that the ACCC appear before a committee of the House, on a regular basis, and that part of the recommendation was accepted.

TREASURER:

Time for one more because I have Question Time.

QUESTION:

You mentioned that a lot of the responsibilities for actions under this [inaudible] possibly state and local governments. What are the major areas of action stemming from this that will be – the Commonwealth's responsibility?

TREASURER:

This is why, the institutional mechanism, productivity payments, are so critical to actually driving the reform. Without them, you don't have the confidence that we would be able to make the progress that might otherwise occur. Now, for the last ten years, there's been the increase in commodity prices and rising terms of trade and all those sorts of things, which has masked a fairly modest productivity performance over the last ten years. Now, we can't afford for that to happen in the next ten and that's why we can't take any chances on ensuring that the necessary changes that are needed at the micro level, at states around territories, aren't done. We are prepared to engage fully in that process and openly and consultatively. So, the areas where I think you know you have real low-hanging fruit is in the human services area. Not only that, the changes that can take place in the human services area will produce efficiencies and gains in that sector which will ensure that they will spawn new businesses, create even more employment growth, they are in the sweet spot, in the main channel, of where our growth is, as an economy is, and where the growth of our trade is overseas. So, the coalition of interests that sits between these reforms, trade reforms, the transition occurring in our economy, it's a sweet synchronisation between all of these things. So, the other area, obviously, is planning and zoning. That one – I'm from NSW, and while there's been some improvements there, it doesn't matter where you are in the country, we can always do better in those areas, I don't think there is a Premier who would disagree. That can always lift the level of investment, and construction, and development, and things which are so important to our economy.

So, these are important areas, I think, for early opportunity for the states. Many States have already embarked on some of these, and have already demonstrated the outcomes that they can achieve. In human services – I keep going back to Joondalup hospital, it's a very good example of what can be achieved and the innovation. If we go back 10, 15, 20 years, the ideas around what was achieved post the Hilmer process back then I think they had their sceptics about what could be achieved and the changes and how services were delivered, how they were managed, and who owned them and how they worked. I think there would be similar scepticism about similar things in the social and human services area but the gains are just as big, if not bigger and the bottom line is they'll put more Australians in work.

Thank you.