Hansard debates

                   COMPETITION POLICY REFORM (VICTORIA) BILL
                                 Second reading

  Mr KENNETT (Premier) -- I move:
  That this bill be now read a second time.
This bill is  a direct result of the agreements reached on 11 April of this year
between the Premiers,  the Prime Minister and  the Chief Ministers  to implement
the proposals  of the National Competition  Policy Review Committee,  chaired by
Professor Hilmer.
As members will be aware, the proposals of the Hilmer committee are, in essence,
to implement a national competition policy.

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Under the national competition policy adopted by all Australian governments, all
jurisdictions  will cooperate to ensure that  universal  and  uniformly  applied
rules of market  conduct apply to  all  market participants regardless  of their
form of ownership. In other words, the implementation of the policy will lead to
a truly level playing field for all participants in the economy.
The national competition policy is based on a number of related considerations:
        first,  that a competitive, transparent and  open  market  provides  the
        greatest stimulus  for  the  development  of  a  strong,  efficient  and
        innovative economy;

        second, that it is far more  cost effective for business  and government
        to  operate under a national competition regime with  consistent  rules,
        rather  than   a  plethora  of  state  specific  and  industry  specific
        regulatory arrangements;
        third, that Australia is, for most purposes, a national market and it is
        therefore  appropriate  to develop  a nationally consistent  approach to
        competition policy  to  further integrate  the  national market,  reduce
        complexity and reduce duplication; and
        finally, that to  be fully effective the  policy must cover every sector
        of  the  economy,  including government  enterprises  and utilities.  At
        present the  competitive conduct rules in part IV of the Trade Practices
        Act  are  of limited application as they do not apply to conduct  beyond
        the scope of the commonwealth's legislative power.

        The objective of  the bill before the house is to expand the application
        of those rules.
However, before I deal with the matters contained in the bill I will outline for
the  benefit of the  house  the elements contained  in the national  competition
policy which are  to be implemented  in  accordance with  the  intergovernmental
agreements.
COMPETITIVE NEUTRALITY
The   principle  of   competitive  neutrality  requires   that  government-owned
businesses  competing with private  sector businesses should compete on the same
footing: business activities of government-owned bodies should not enjoy any net
competitive advantage simply as a result of their public sector ownership.

In  particular,  such bodies should  face  equivalent  taxation  and  regulatory
regimes and similar  costs  of  funds.  Implementation of competitive neutrality
will  involve corporatisation  where  appropriate,  tax  equivalent payments  by
government  business  enterprises,  equivalent   regulatory   frameworks,   debt
guarantee fees and  general  pricing policies.  The  house will note  that  this
government  is  already committed to this principle in the context of the reform
of government business enterprises.
PRICES OVERSIGHT OF GOVERNMENT BUSINESS
State and territory governments have agreed to consider establishing independent
sources  of  price   oversight   of  state  and  territory  government  business
enterprises, where such oversight does not exist.

In Victoria the Office of  the Regulator-General already  performs this function
in relation to entities in the electricity, water and grain  handling industries
and is likely to do so for entities in the gas and ports industries. At the same
time the Commonwealth  Prices  Surveillance Act will  be  amended to permit,  in
certain  circumstances,  price  oversight  of  state  and  territory  government
businesses. National prices oversight of  state government business  enterprises
may  be  applied if  a  state  agrees  or if  it  is  judged  that an  effective
independent  pricing mechanism is not in operation in an  area  deemed  to  have
significant impact on interstate and overseas trade.
STRUCTURAL REFORM OF PUBLIC MONOPOLIES
The  Hilmer  committee  proposed  that  public  monopolies  be  restructured  to
introduce competition into a market traditionally dominated by public monopolies
and proposed a number of methods of restructure.

Such  restructure  is  even  more important if a substantial monopoly is  to  be
privatised. All governments have now  agreed  upon a set of principles which are
designed to ensure that public monopolies are subject to appropriate restructure
before they  are corporatised or  privatised. Compliance with this principle can
be seen in the restructure of victoria's major public enterprises.
ACCESS TO ESSENTIAL SERVICES
Access to certain strategic essential facilities may be necessary  if a party is
to  compete in  certain  markets. These  essential  facilities  will usually  be
natural monopolies  which  cannot be  economically  duplicated  -- such  as  the
high-voltage  electricity transmission grid,  to which access is  essential if a
party is to  compete in  the market  for supply of electricity to customers. All
governments have now agreed on a  framework  for  access to services provided by
significant infrastructure facilities.

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REVIEW OF LEGISLATION THAT RESTRICTS COMPETITION
The Hilmer report found that legislative and  regulatory restrictions were among
the  most  pervasive  forms  of  restriction  on competition  in  the Australian
economy. These restrictions  arise from legislative  or regulatory  arrangements
such  as  the licensing of  particular  occupations, the  creation  of statutory
marketing authorities for  agricultural produce,  and statutory restrictions  on
transportation of certain goods.  All governments have agreed to review existing
legislation that restricts competition by December 2000. Thereafter, legislation
will be  reviewed  every 10 years.  The  guiding principle is  that legislation,
including  regulations,  should  not  restrict  competition  unless  it  can  be
demonstrated that the benefits to the community outweigh the  costs and that the
objectives of the  legislation can be  achieved only by restricting competition.
New legislation will need to comply from the outset.

The  final  element in  the  national  competition policy  is  the element which
directly  concerns the  bill before  the house:  the extension of part IV of the
Trade  Practices Act to  all  persons within the  legislative  competence of the
state.
Part IV  of the Trade Practices Act sets out the competitive conduct rules which
govern   incorporated  enterprises.   This  act  draws   on  the  commonwealth's
constitutional power to regulate corporations and over interstate trade. Part IV
does  not  extend  to  unincorporated  enterprises  which  are  not involved  in
interstate trade, nor  does  it cover  state-owned  entities or  state  business
activities covered by the shield of the Crown.
This  bill deals principally  with  the application of  the competition code  to
persons within the  state's  legislative competence  and  allows for a  national
scheme to administer the code.

The code is created by the Commonwealth's Competition Policy Reform Act 1995 and
essentially consists of part IV as applied  to persons rather than  corporations
as well as the remaining relevant provisions of the Trade Practices Act.
The major functions of the bill are that it:
        applies the competition code as a law of Victoria;
        automatically applies future modifications  of the code  by commonwealth
        law  within  two months of  the date of modification  unless excluded by
        order in council;
        applies the Commonwealth Acts Interpretation Act 1901 to the code;

        applies  the  code  to  the  Crown in relation to each of the Australian
        jurisdictions in so far as the Crown carries on business;
        subjects  the  Crown  in  right  of  Victoria  to  the  codes  of  other
        jurisdictions;
        confers functions on the Australian Competition and Consumer Commission,
        the  National  Competition  Council  and   the  Australian   Competition
        Tribunal;
        confers jurisdiction  on the Federal Court to the exclusion of Victorian
        courts;
        applies commonwealth laws to breaches of the code; and

        applies  commonwealth administrative law  to matters  arising  under the
        code.
A most important aspect of  the bill is that state governments, as well as state
authorities which represent the Crown, will now be  required to comply with part
IV of the Trade Practices Act  to the extent that they carry on  a business. The
term 'business'  is  defined to  exclude  certain forms of  government activity,
including such activities as taxing, licensing and  certain forms of  compulsory
acquisition  of  primary  products.  Similarly,  transactions   between  persons
representing the same state entity will not be regarded as business.
The functional parts of the  bill will  come into  operation 12 months after the
royal assent to the commonwealth's  Competition Policy Reform Act -- that is, on
21 July 1996.

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For  a year from that  date,  activities newly subject to  part  IV of the Trade
Practices Act will not be subject to pecuniary penalties under the act, although
other  remedies  will apply. All contracts entered into prior to 19 August  1994
which give effect to activity that would  offend part  IV of the Trade Practices
Act will be  protected from the operation  of the code until they  are varied or
until they expire.
The house will note that under the commonwealth's Competition Policy  Reform Act
states retain the  power to enact exemptions  from the competitive conduct rules
of the Trade Practices Act. However,  states will be able to exempt conduct only
if the exempting law expressly identifies the activity being exempted and refers
to  the Trade Practices  Act. Given the Victorian government's strong commitment
to the  spirit  of competition, a significant case would be needed for exemption
to be provided.

In most cases it is expected that anti-competitive conduct should be modified so
that it ceases to be anti-competitive rather than an exemption sought.
The house  will note that the bill is modelled on the  act prepared and recently
passed  in New South Wales. That act was  prepared following discussions between
the state parliamentary counsel of  each of the jurisdictions.  It is understood
that each of the  other  states  and the territories will also enact application
legislation based on the New South Wales act.
I wish to make a statement under section  85(5) of the Constitution Act  1975 of
the reasons for  altering or varying that section by the bill. Clause  38 of the
bill provides  that it is the intention  of that clause to alter or vary section
85 of the Constitution Act 1975.

This provision precludes the Supreme Court from entertaining civil and  criminal
matters under the competition code other than those which arise under any law of
Victoria relating to the cross-vesting of jurisdiction.
The reason for limiting the jurisdiction of the Supreme Court is as follows. The
bill, the Competition Policy  Reform Act 1995  and the complementary legislation
of  other  states and  territories  will establish  a  national  scheme for  the
administration of the  competition code of  this  jurisdiction and the  codes of
other jurisdictions as if the codes were  a single commonwealth law. This scheme
will allow the  codes to  be administered  in a nationally consistent way and in
the same manner as part IV of the Trade Practices Act 1974 of the commonwealth.
To give effect to this national scheme, the bill and the complementary state and
territory legislation will vest jurisdiction  concerning  code  matters  in  the
federal court.

This will  be to  the exclusion of the jurisdiction of local  courts other  than
jurisdiction arising from local cross-vesting of jurisdiction laws. As a result,
the codes will be administered  as if they were  a  commonwealth law and in  the
same manner as part IV of the Trade Practices Act 1974.
It would reduce the effectiveness of the national scheme if the Supreme Court of
a state had additional jurisdiction concerning matters arising under the code as
such a variation to the scheme will allow the code to be administered in a state
in a manner which will not be consistent with the administration of the codes in
other jurisdictions.
The enactment of this bill is the first step in the implementation of the agreed
national competition policy in Victoria. As members will be aware, the Victorian
government has  been  at the forefront  of  competition reform since  coming  to
office in October 1992.

The government's reforms of state-owned enterprises  in  the  electricity,  gas,
water, ports and other sectors are aimed at harnessing the positive strengths of
competition  and  imposing   ongoing  disciplines   on   utilities  to   improve
performance. The objective of the  Victorian government reform  program has been
to  improve  the  efficiency of these key service industries in order to  reduce
business costs and increase the overall productivity of the Victorian economy.
The   competition  policy  both   complements  existing   micro-economic  reform
initiatives  in Victoria and  provides  a broader framework  for the pursuit  of
reform  throughout  Victoria. It also complements the  regulatory  and  consumer
protection initiatives which the Victorian government has  put in place as  part
of  its state-owned enterprise  reform program -- for example, the establishment
of  the Office of the Regulator-General to promote and safeguard competition and
to ensure consumers benefit from competition and efficiency.

Other significant initiatives include the implementation of a community services
obligations policy,  complaints and  dispute mechanisms,  consumer consultation,
service standards and credit management schemes.
Clearly,  the  Victorian government  is  well placed  to  implement  the  agreed
competition policy, and to ensure that Victorians enjoy the substantial benefits
of  increased efficiency  and  productivity  that  are  expected  to ensue.  The
Industry Commission  has estimated that the  full range of  national competition
policy reforms  has  the potential to  bring about a substantial  improvement in
Australia's  standard  of living. In  March  the commission  concluded  that the
implementation of Hilmer and related reforms could lead to a $23 billion, or 5.5
per cent, per annum increase in real national GDP.

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The head  of government agreements, the national competition policy and the bill
before the house represent a significant achievement for this government and all
Australian governments, and for this  state  and  the  nation  as a whole. These
achievements,  reached   through  an   unsurpassed  spirit  of   interstate  and
state-commonwealth cooperation and common purpose, will  lead to the dismantling
of  the  private and regulatory  barriers  to competition  and  the promotion of
competition throughout the economy. As a result, there will be a  major boost to
the  growth prospects  of  the  national and  state  economies  to provide  more
opportunities for the benefit of all Australians.
I commend the bill to the house.
Debate adjourned on motion of Mr BRUMBY (Broadmeadows).
Debate adjourned until Thursday, 21 September.