The Bases and Impact of Competition Policy

Abstract

The recommendations in the National Competition Policy report have been widely discussed and reviewed. These recommendations were shaped by the Committees views on what constitutes competition policy, and its overall approach to developing the policy in the Australian federal system. This paper therefore sets out the main bases of the Committee’s report. In summary, the report rests on three main propositions, each of which is discussed in turn. Competition policy covers a broad set of laws, policies and government actions that should be seen as an integrated whole. A national competition policy could not, in our view, sensibly prescribe detailed guidelines for competition in every sector, ranging from electricity generation to farming and professional practice. The recommended processes and institutions leave much of competition policy squarely in the political domain. Economics rarely provides clear answers to matters of conflicting interests, though economic analysis can and should be used to make the trade-offs more transparent. The final section then discusses how the process of formulating and implementing competition policies impacts efficiency and economic growth.