Stewart McArthur (Corangamite, Liberal Party) Share this | Link to this | Hansard source

I refer to the previous speaker, the member for Wills, and make the observation that his discussion revolved around the infrastructure of airports which historically were publicly owned and moved to the private sector. My discussion will revolve around private sector investment, where investors place their money at risk in the Pilbara region, and the quite major impact this bill will have, depending on the outcome.

However, I am very pleased to contribute to the important debate on the Trade Practices Amendment (National Access Regime) Bill 2005. The Howard government is acting to improve the workings of the national access regime arrangements instituted in part IIIA of the Trade Practices Act 1974 to provide investors and access seekers with greater confidence and certainty over the regulatory environment and to encourage investment in infrastructure. The national access regime is a complex regulatory mechanism, as most members would be aware. The challenge for government is to protect the property rights of businesses to ensure private enterprise has the incentive to invest in infrastructure while enhancing national productivity and wealth creation.

The provisions for a national access regime are intended to assist the private sector in maximising utilisation of essential publicly owned infrastructure and supporting competition. The national access regime is not intended to strengthen opportunities for a socialist state to interfere in private business affairs. In this regard governments have a responsibility to carefully consider the powers proposed to be delegated to regulators and to curb those to allow wherever possible for businesses—asset providers and access seekers—to negotiate the use of facilities on a commercial basis. This simple position is that the national access regime was proposed to allow private enterprise to compete against state government owned and regulated monopoly services. Prior to the national competition policy reforms of the 1990s, these state owned services—water, power and transport—were generally inefficient and held back Australian industry, retarded economic growth, distorted investment and hamstrung our export industries—agriculture, resource and manufacturing—making vibrant Australian business and industry less competitive in the international market.

The national access regime was not meant to undermine private businesses which had invested in privately owned and operated infrastructure. Private infrastructure owners should expect to be able to determine access arrangements commercially without undue interference from government and on a basis that is suitable to them. To illustrate this point with a contemporary example, I cite the case between Fortescue Metals Group Ltd and BHP Billiton. In this case Fortescue, a private company, is seeking legal access to the private railway infrastructure of another private company, BHP Billiton, at the company’s Mount Newman railway system located in the Pilbara region. Fortescue Metals Group has applied to the National Competition Council to have the BHP railway infrastructure declared under the Trade Practices Act and the NCC’s draft recommendations released in November 2004 supported declaration.

Declaration of the private rail infrastructure would not necessarily mean that Fortescue Metals Group, or another smaller company, would automatically gain access to the railway but it would provide ‘a legally enforceable right to negotiate access to the Mount Newman rail line’. I quote again:

A decision to declare the Mt Newman service will not automatically result in FMG gaining access.

A decision by the Minister to declare the Mt Newman service will entitle FMG to seek access either through an agreement negotiated with BHP Billiton or, in the absence of an agreement, through arbitration by the Australian Competition and Consumer Commission (ACCC). The ACCC has the power to impose access terms ...

The source of these quotes is an NCC media release, ‘draft recommendation’, 4 November 2005.

An agreement could be negotiated with BHP Billiton or, failing that, access could be arbitrated by the Australian Consumer and Competition Commission, which could impose conditions on BHP Billiton over the use of its own private infrastructure. Such an outcome would undermine the confidence in private investment. That is the key argument that I put forward in this contribution.

This bill introduces amendments to part IIIA as the government’s response to the recommendations of the Productivity Commission’s inquiry report Review of the National Access Regime, September 2001. The bill’s provisions are consistent with the findings of the Prime Minister’s Exports and Infrastructure Taskforce, which reported in May 2005. The taskforce made important findings in relation to the national access regime. The national access regime was established coming out of the national competition policy reforms recommended by the report of the Hilmer committee on national competition policy. The Hilmer report discussed the impact on national competitiveness and on business access to, and investment in, ‘essential services’ that represent ‘essential facilities’ for businesses. The report stated:

... the term ‘natural monopoly’, electricity transmission grid, telecommunication networks, rail tracks, major pipelines, ports and airports are often given as examples. Some facilities ... occupy strategic positions in an industry, and are thus ‘essential facilities’ in the sense that access to the facility is required if a business is to be able to compete effectively ...

The source of that quote is the report by the Independent Committee of Inquiry into national competition policy from 1993.

The matter of access to such facilities includes not only the matter of obtaining access to the ‘essential facility’ but also the pricing and conditions attached to the access. The Commonwealth and state and territory governments considered the Hilmer report and agreed to implement the national competition policy package of reforms. The national access regime was an important element of these reforms, allowing third parties to seek access, on reasonable terms and conditions, to the services of essential infrastructure facilities. Principles for a national access regime were established under clause 6 of the Competition Principles Agreement between the Commonwealth, states and territories, and the legislative framework was established, as I mentioned earlier, under part IIIA of the Trade Practices Act 1974.

So the philosophical question is: who has a right of access to infrastructure facilities in Australia where it is not practical or economical to duplicate the infrastructure? That is the key question I wish to address. We see these questions on the debate on Telstra with regard to who should own the Telstra network and who, under regulation, should have access to that infrastructure. There are debates concerning who owns the port facilities—the member for Wills alluded to that—and who has access to these services; who owns the free-to-air television spectrum and who has access to purchase the licences; ownership of electricity networks and the cost of accessing these networks for energy retailers; and who owns the road network and who should contribute to road maintenance and upgrade. The answer to these questions is becoming more difficult with the changing ownership arrangements following corporatisation and privatisation of what were originally government owned facilities and services and because of private-public partnerships. The national access regime has been reviewed many times since the introduction of national competition policy.

I was pleased to be a member of the House of Representatives Standing Committee on Communications, Transport and Microeconomic Reform inquiry into the role of rail in the national transport network. The committee reported in July 1998 and the report was entitled Tracking Australia. This was a very good report which considered the effectiveness of the national access regime as it applied to utilisation of Australia’s rail infrastructure. The committee was asked to consider Rio Tinto’s iron ore rail operations for its wholly owned subsidiary, Hamersley Iron, in the Pilbara. The case is different in the Pilbara because, unlike the eastern seaboard, where we are talking about rail infrastructure built by Australian taxpayers, Rio Tinto’s rail network is independently owned and operated and has been purpose-built to support its own operations and paid for by their own shareholders. Rio Tinto explained the difference in the circumstances in its 1998 submission to the Productivity Commission’s inquiry into progress in rail reform:

Privately owned rail systems in the west were designed from the start to be fully integrated into the production systems of which they are part. This is a pattern of development quite different to that experienced earlier in the eastern States, where State governments played the major role in providing ‘common carrier^’ infrastructure services across the region and it was not open to the coal companies to develop their own rail systems. In designing policy to enhance community welfare, it is vital that these differences be recognised. Failure to do so risks very substantial damage. The reform process, as it has been experienced to date, has impacted very differently on the privately owned systems in the west and the State-owned monopolies in the east. Both sets of impacts need to be carefully considered in assessing the progress of reform and recommending measures to enhance the flow of benefits.

The committee considered the potential disruption to Rio Tinto’s highly integrated operations through third party access to the mine to port rail haulage operations and the risk to private investment in the development of infrastructure facilities. The fundamental question is: who has the right to determine access to privately owned and constructed infrastructure facilities such as the Rio Tinto iron ore rail? On this matter, the Tracking Australia report makes the following comment in paragraph 4.54:

The committee recognises the potential national benefits of granting third party access to privately owned infrastructure of economic significance, such as the Pilbara iron ore railways. However, it also recognises the enormous difficulties in providing for that access without interfering with the property rights and/or material interests of the infrastructure owner. The committee considers that, in general, the benefits to costs ratio of providing for third party access to rail infrastructure, private or public, is unlikely to be positive where that rail infrastructure forms part of a highly utilised, integrated production process (such as mining or milling).

I personally observed these operations and support that recommendation very strongly. In a briefing to parliamentarians last year, Rio Tinto argued that the company’s ability to respond to market opportunities for increased demand from China is directly related to the single user nature of its privately owned rail infrastructure. Rio Tinto’s export capacity will have expanded by 75 million tonnes per annum between 2002 and 2006, ‘adding $3.75 billion to Australia’s export earnings’. Rio Tinto have also argued:

Allowing third party access to the Pilbara infrastructure will inevitably mean that the inefficiencies of the east coast multi-user facilities will be transported to the Pilbara.

This is a sobering argument. The Productivity Commission was asked to review the national access regime and reported in September 2001, which report I mentioned earlier. The government’s response to this report underpins the amendments in this bill.

Dr Alan Moran, from the Institute of Public Affairs, made an important submission to the Productivity Commission inquiry in December 2000, and it is worth mentioning in this debate. The submission addresses the question of access to private infrastructure. It is a fairly long quote, but it should be on the public record. The IPA wrote:

Ostensibly, the Hilmer Report itself did not differentiate between private and publicly provided essential facilities. It was however aware of the harm that could be visited on private property rights generally by regulatory seizure of some of those rights. Hence ... the report understood the deleterious investment implications of regulation. Indeed, the authors said they were, ‘conscious of the need to carefully limit the circumstances in which one business is required by law to make its facilities available to another’ (p.250). The Hilmer Report returned many times to emphasise the need to avoid undermining property rights and, hence, investment incentives, (e.g. p. 256, 258). Hilmer added ‘While it is difficult to define precisely the nature of the facilities and industries likely to meet these requirements, a frequent feature is the traditional involvement of government in these industries, either as owner or extensive regulator.’

In reality the impetus for the Hilmer report was to redress the competitive restraining effects of state government owned or controlled monopolies. In Australia in the early 1990s the only “essential facilities” were those businesses which enjoyed government support or protection from competition.

This is an important element to recognise when considering the extent to which the national access regime should impact on private infrastructure.

More recently, the impact of the national access regime on Australia’s exports and infrastructure was considered by the Prime Minister’s Exports and Infrastructure Taskforce, which reported in May 2005 and which the member for Wills referred to in his speech. The taskforce was chaired by Dr Brian Fisher and its members were Max Moore-Wilton and Henry Ergas. It was a high-powered taskforce with intellectual depth and considerable experience in this area. The taskforce addressed the conflict that exists under the national access regime between the objective of promoting competition and the need for government to step out of the way of successful Australian businesses operating on the highly competitive international market. It said:

... Australia has a strong interest in the efficiency of export oriented infrastructure. However, it is important to remember that export industries operate in competitive world markets. Producers have little ability to increase price above the competitive level, as they are largely price takers ...

As a farmer, I agree with that entirely. It also said:

... the view of the taskforce is that regulation should be sparingly applied to infrastructure used by export industries.

It also said:

... third party access to a vertically integrated, tightly managed, logistics chain may promote competition, but undermine the efficiency with which that chain is operated and managed.

Currently, there is no clear mechanism allowing an ‘efficiency override’—

and I emphasise that comment—

for applications for declaration of export related facilities under Part IIIA or its associated regimes. Part IIIA lacks any authorisation mechanism, based on efficiency, that could be used to limit the scope of access. While there is a public benefit limb to the Part IIIA tests, its phrasing significantly narrows its impact. Finally, while there is an exemption provided for ‘production processes’, that term is not defined, nor is any guidance given as to the purpose and scope of the exemption.

Even if efficiency considerations were not explicitly included in Part IIIA, the taskforce believes it would be desirable to clarify the ‘production process’ exemption. More specifically, it should be made clear that the purpose of the exemption is to prevent the imposing of third party access in vertically integrated, tightly managed, logistics chains, especially those related to our export industries. This would minimise the risk that access regimes would disrupt and undermine the very areas of the economy that have performed best in the management of export related infrastructure.

That is from the May 2005 publication Australia’s export infrastructure: report to the Prime Minister by the Exports and Infrastructure Taskforce. I note that Rio Tinto, which I mentioned earlier, have strongly endorsed the implementation of the taskforce’s ‘efficiency override’ consideration into part IIIA of the Trade Practices Act. The taskforce also reported:

In our view, there should be a presumption that issues associated with export oriented infrastructure will be resolved by commercial negotiation between the infrastructure provider and users. We accept that this will often be imperfect, but it is still likely to be preferable to intrusive regulation.

Again I support that point of view. The infrastructure taskforce recommended the Council of Australian Governments simplify and streamline the regulatory process applying to export oriented infrastructure by:

... providing a presumption that issues to do with export oriented infrastructure will be resolved by commercial negotiation between the infrastructure provider and users.

I welcome the taskforce report. The infrastructure taskforce and the IPA have reflected my own views on the application of the national access regime. I apologise to members of the House for the technical nature of this bill and the explanation, but it is a very complex legal argument which does reflect a final decision in the case of BHP, Rio Tinto and those companies that have made investments of shareholders’ money in infrastructure.

The national access regime is important to allow competition to state government regulated services, to maximise the utilisation of and investment in infrastructure to support the economic prosperity of the country. By introducing the ‘efficiency override’ provision, as recommended by the Prime Minister’s infrastructure taskforce, regulators would consider the individual circumstances of each case and, where private infrastructure assets were in question, the competition objective would be offset by the need to support the efficiency of successful existing operations, such as Rio Tinto Iron Ore at Hamersley Iron in the Pilbara.

I commend the bill. I have some sympathy with the amendment put forward by the opposition and some of the points of view that I have read in the press. It is a complex issue. It is one that I have looked at quite carefully in terms of the railway access. If we have the current railway arrangements for freight in Australia where access regimes are being negotiated quite equitably on the one hand and where private sector investment in the north-west has made absolutely huge investments in rolling stock and railway track on the other hand, those investments should be protected and not overridden by some very fine legal interpretation of part IIIA of the access regime. It would be my hope that these amendments in the bill would clarify some of these very technical arguments and that investors in future could be assured that their billions of dollars of investment into infrastructure projects would not be at risk by legal interpretations of the act, both in spirit and in the legal content.

I commend the general debate on competition policy. I think both governments have done an excellent job in promoting the competition concept. I think it is part of Australia’s current prosperity that we have taken away the bottlenecks of those non-competitive activities of state governments in the last 15 years so Australia is at the forefront of those infrastructure activities which are generally undertaken by state governments and local councils in other countries. I think we lead the world. I hope that this bill will lead the world in providing clear, absolute guidelines that will protect private investors so that they can invest with confidence in the future because of these considerations. I commend the bill to the House.

Simon Crean (Hotham, Australian Labor Party, Shadow Minister for Regional Development) Share this | Link to this | Hansard source

I rise to support the amendment moved by the member for Hunter on behalf of the Australian Labor Party. I say at the outset that Labor do support the recommendations of the Productivity Commission which form the basis of the Trade Practices Amendment (National Access Regime) Bill 2005. We also support the bill’s intention of improving the operation of the national access regime. This regime aims to ensure access to infrastructure where elements of a natural monopoly exist so that we do enhance competition, despite that natural monopoly, and we restrain that monopoly behaviour while at the same time not putting up a barrier to investment, which I think was the point the member for Corangamite was making towards the end of his speech. I am sure he made it at the beginning too, but that is the bit that I heard.

The bill moves to change the act in the following ways. It includes a new objects clause. It includes pricing principles. It provides for the regime to include only projects of national significance. The bill contains new arbitration and appeal procedures. There is restriction of access to the national regime where there is an effective state regime, there is immunity from the regime where a government service is provided by competitive tendering and there are new target time limits and procedures for consultation and reporting of decisions. So this has some important and comprehensive elements attached to it.

In particular, we support the inclusion of pricing principles in the act, as originally recommended by the Productivity Commission but not originally embraced by this government when it first brought the bill into the House. I will come to that in a minute. The point I want to make at this stage is that we urge the government to accept the amendment proposed by the member for Hunter which allows consideration of regulatory risk but does not necessarily mandate that that consideration occur. The government, on the other hand, proposes to mandate the consideration of regulatory risk.

Over recent years we have seen the privatisation of many formerly publicly owned infrastructure facilities. Given that trend, it is essential that we ensure that users have fair and reasonable access to those facilities and that exorbitant monopoly rents are not extracted which will be passed on to consumers or which will make our exports more expensive on world markets. What Labor have concern with is the way the principles are proposed to be worded. It in effect tips the balance too far in favour of the owners, who may well set exorbitantly high prices at the expense of users and consumers. We accept that regulatory risk is and can be a pricing factor for providers and has to be subject to regulatory control. The real issue is: how do we take account of that regulatory risk? In some cases, it may be appropriate to take account of it, in others not. What the government’s amendments do is essentially mandate that in all cases it is taken account of. That means that the owner will be able to pump up prices for what they assert to be that regulatory risk and insist that it has to be taken account of because the act as is proposed requires it. Our amendment effectively provides discretion to the regulator. It would leave it to the discretion of the regulator, and we believe that is the sensible course of action to take.

It is interesting to note—and I said this earlier—that when this bill first came into the House there were no pricing principles included in it. We argued at the time that there needed to be pricing principles. Again, the member for Hunter, on our behalf, put forward a set of those principles. The government has now accepted that pricing principles have to be included and has proposed by way of an amendment to include them, but not to the full extent that we were suggesting. This bill gives an opportunity for greater certainty for both investors and users, and these are the two vital components when it comes to the provision of these services.

In the second reading speech the Parliamentary Secretary to the Treasurer quite rightly listed the reasons why statutory principles are important. Those opposite were late converters to this cause; nevertheless, they have been converted and we welcome it. What we ask is: why don’t they go to the full extent that we have been suggesting? The Productivity Commission recommended statutory pricing principles be established. The parliamentary secretary said that they will provide guidance on the broad objectives of access regimes and how these will be applied, they will provide greater certainty to regulated firms and access users, they will provide guidance for approaches in particular industries and they will help to address the concerns that a regulator will unduly impose its own values.

The government, having thought long and hard over four years, and having brought this bill into the House with no pricing principles included, caved in on the day debate on this bill was first scheduled. That was some time ago, because debate on this bill has been a long time coming, as all members who are prepared for it would know. Whilst the government has adopted Labor’s amendment and suggestions for pricing to a large extent, it has not gone the full extent and this legislation does come to us in a weaker form. Labor’s amendment will strengthen it.

The basic purpose of the Trade Practices Act is to promote competition and to protect users and consumers. The national access regime which this bill amends is a legal regime in the Trade Practices Act to facilitate user access to services provided by essential facilities—essential facilities that operate as natural monopolies such as rail lines, gas pipelines, electricity and water infrastructure. It does not make sense to build duplicate railway lines, roads, electricity grids and so on. We do accept that you need only one of the carriageways, a physical structure, in the forms that I have identified. But, given that we acknowledge that point, putting those monopoly facilities in private hands demands that we ensure that provisions are in place to prevent them from extorting monopoly rent from the natural monopoly they have come to own.

Telecommunications is obviously another vital piece of infrastructure, particularly for the regions—and I will come to that in a minute. It is not dealt with in this legislation; it is dealt with separately. The provision of telecommunications services throughout the nation and particularly in the less populated and less profitable rural and regional areas is of great concern. It is the great enabler for our regions. Without affordable access to fast broadband internet connection, the regions will be left behind. If we want them to participate in the information economy and to establish small businesses in their homes or in their remote communities, they need to have affordable access to this infrastructure. It is the great challenge. It is a debate that we will have, particularly associated with the further sale of Telstra, if the government proceeds down its intended path.

In the context of the national access regime, the principles inherent in it and the access to it, it is interesting to remind ourselves that the pricing of Telstra’s last mile infrastructure, which is in effect a natural monopoly, also presents the same sorts of challenges to the provider of it, unless we also ensure access to users at affordable rates. One of the reasons that we as a nation have failed to properly utilise broadband is the lack of effective last mile access. This is an issue that is going to be debated seriously.

Whilst Telstra is not dealt with in this bill, I think you can see that the sorts of principles that apply to a national access regime also have relevance to this other vital piece of infrastructure. Everywhere that I travel in regional Australia, the need is always raised with me for affordable broadband access. It was underpinned in the recent State of the regions report. In essence, it found that the regions that have good access are doing well; those that do not are left behind.

Labor are committed to fighting for the provision of affordable broadband access throughout the nation. In my view, it is probably the greatest infrastructure challenge that this nation faces. Just as access to the standard telephone was the clarion call of the past, access to fast broadband is the new one. It is about how we link the regions; it is about how we empower them. It is the fundamental issue that regional development will hinge on. Labor believe that the best way to do that is to keep Telstra in government ownership, and to the extent to which there are market failures—and there are many, otherwise we would not be talking about the problem—to fund that market access through a component of the ongoing dividend stream. Labor have always argued that in the past. If anyone doubts the significance of it, we proposed this back in 1998. I got the library to do the calculation. At that stage we proposed a 35 per cent component of Telstra’s dividend stream being applied to a fund to connect the nation. The library has indicated that, had that policy been put in place, there would have been in excess of $5 billion in that fund. That would have taken us a very long way to the connectivity challenge that I have talked of and, in particular, to fund the market failure, which is inherent in the more remote and regional areas of our country.

Our view is that the government’s solution will not work, because they are going to sell it, they are going to get a one-off payment, but they are not allocating sufficient from that payment to meet the task. The National Party have gone along with this—once were Nationals, I might say, Mr Deputy Speaker Causley. I know your allegiances. In our view, they are now just a paid-up branch of the Liberal Party. The defection of Senator Julian McGauran is an example of it. I seriously think that the way in which the sell-out by the Democrats saw their demise as a political party because they ratted on a fundamental commitment to the electorate, so too will the sell-out of Telstra by the National Party herald their demise. We are already seeing the fracturing within that party structure. It has a terribly important political component attached to it, quite apart from this very fundamental issue as to how we connect the nation.

Labor do not just oppose the sale for the sake of it. We oppose the sale because, if we are going to try and address a regulatory regime or control to ensure affordable access, one of the best ways to do it is to have government ownership, but also access to the dividend stream in perpetuity to fund the necessary expenditures.

The ACCC and this parliament, through legislation like this bill, have to ensure that in most cases the monopoly telecommunications providers—certainly at the moment that means Telstra—have to provide competitive access to the networks for other providers or direct access to consumers. This is a debate that is going to run hot. It will be interesting to see next week in Senate estimates how Telstra responds to this. Labor will be taking a very keen interest, but it will also be interesting to see what sorts of questions the National Party will be asking on this crucial issue for the reasons that I have just outlined.

It is my contention that we do need sound principles underpinning an access regime. We all accept the way in which what were monopolies perhaps under government statutory bodies and under government control in the past have moved in different directions, in many cases in the hands of private providers. If we are going to go that way—and we have supported that direction—it is essential that we underpin competitive pressures and opportunities in the community through an effective access regime.

This government has been soft on competition policy. I was interested to note that the Treasurer is calling upon COAG this week to back his plans through greater competitive pressures to start addressing our bottleneck issues. This government has been very poor in supporting a competitive environment. It has failed to allow small businesses access to collective bargaining. It has failed to allow the ACCC to continue to make decisions on mergers. It has failed to reform the Trade Practices Act to constrain abusive market power, especially against small businesses. It has refused to introduce cease and desist orders, which we think are terribly important, where people are exploiting their monopoly or duopoly position, and it has tried to water down third line forcing laws, but we forced it to back down.

There is a deficiency factor in the so-called clarion call of the Treasurer in urging greater competition. Whilst we do support greater competition and regimes that support it, it will count for nought unless the government is prepared to invest in the nation’s ailing infrastructure. That was an issue that I spoke about earlier today in another debate—a debate associated with the Future Fund—a means by which we take the proceeds of a nation’s prosperity and reinvest it in social and economic infrastructure that makes a better return than simply putting the money in the bank.

We have the opportunity to create an environment to better build this nation, to better build it by stronger competition arrangements. This bill forms part of that, but it is deficient in that it does not go far enough on the pricing principles and also on the question of a government being prepared to invest sensibly in the nation’s infrastructure. We need a national infrastructure audit. We need a national strategy involving state and federal governments, and that is what COAG should be addressing and turning its mind to on Friday. How do we identify the infrastructure imperatives for this nation and how do we work together to achieve them?

People are sick of the buck-passing. They do not want to see the unseemly brawls that always come out of these conferences about whose responsibility it is. People want the problem fixed. They want their roads, their ports, their electricity, their gas pipelines and telecommunications infrastructure. Governments have a responsibility to lead. This government is not leading. This bill is deficient on the pricing principles. I urge the government to take a more responsive, cooperative and leadership role at COAG to address the infrastructure needs of this country. (Time expired)

Danna Vale (Hughes, Liberal Party) Share this | Link to this | Hansard source

I appreciate the opportunity to speak on the Trade Practices Amendment (National Access Regime) Bill 2005. I note the comments of the honourable member for Hotham. I would like to add and point out to him—and I am sure he is very much aware of this—that a government entity does not have to own an organisation or an entity to control it. We are the legislators, and we can determine the size of the ballpark and the activity by our regulations and legislation. However, this particular bill—the purpose of which is to make practical amendments to the Trade Practices Act 1974—will implement many of the recommendations that were made by the Productivity Commission in its review of the national access regime. A national access regime that promotes competition is essential for Australia’s infrastructure facilities such as natural gas pipelines, the electricity grid and the rail track, all of which play a key role in Australia’s economic and social development.

A separate regime, part XIC of the Trade Practices Act, applies to the telecommunications sector. The efficient use of and continued investment in facilities such as these is of strategic importance to our country. Accordingly, the government’s policy is to assist realising the potential contribution of such services to economic growth and the improved wellbeing of all Australians. An important element of national competition policy reforms was the establishment of a national access regime, allowing third parties to seek access to the services of certain essential infrastructure facilities on reasonable terms and conditions, if commercial negotiations fail. This ensures that facilities with natural monopoly characteristics do not create barriers to competition. This promotes competition in upstream and downstream markets, which is essential for sustaining strong economic growth and job creation, and contributes significantly to efficiency and innovation. Importantly, the national access regime is not intended to replace commercial negotiations between access seekers and providers but seeks to support the legitimate interests of essential infrastructure owners.

The national access regime was introduced following the Hilmer report’s recommendations. The Commonwealth, state and territory governments proceeded to implement the reform measures. All became signatories to the competition principles agreement, and the Commonwealth inserted part IIIA into the Trade Practices Act. Clause 6 of the competition principles agreement sets down the operating principles for the national access regime. It specifies for the Commonwealth to establish a generic access regime, and part IIIA of the Trade Practices Act puts this generic access regime in place. It also makes provision for state and territory access regimes to operate alongside the Commonwealth regime so that, where a state or territory regime has been certified as operating in accordance with the principles of clause 6 of the competition principles agreement, access to this regime cannot be sought under part IIIA of the Trade Practices Act.

So, with access regimes operating at both the Commonwealth and the state and territory level, access seekers may have to rely on accessing a facility under part IIIA of the Trade Practices Act, through a state and territory based industry scheme which may or may not have the support of legislation, or through a Commonwealth scheme that falls outside the scope of part IIIA of the Trade Practices Act—such as the telecommunications scheme in part 11C of the Trade Practices Act or the airport scheme in the Airports Act 1996.

The amendments contained in this bill all relate to part IIIA of the Trade Practices Act. The provisions of part IIIA give individuals and businesses the opportunity to seek access to services supplied by certain publicly and privately owned infrastructure facilities on reasonable terms and conditions and fair prices. Part IIIA provides three paths to gaining access to an eligible infrastructure service: (1) having a service declared; (2) using an existing access regime which has been deemed to be effective; and (3) seeking access under the terms and conditions specified in an undertaking given by the service provider and accepted by the Australian Competition and Consumer Commission.

Access through declaration of a service can occur where an individual or business has been denied access to a facility and they apply to have the National Competition Council declare the service. The National Competition Council makes a recommendation to the minister on whether or not the service should be declared. In making its recommendation, the National Competition Council must consider whether it would be economical for anyone to develop another facility that could provide part of the service. The National Competition Council must not recommend declaration of a service unless access or increased access to the service would promote competition in at least one market other than the market for the service; it would be uneconomical for anyone to develop another facility to provide the service; the facility is of national significance; access to the service can be provided without undue risk to human health and safety; access to the service is not already the subject of an effective access regime; or access or increased access to the service would not be contrary to the public interest.

Once the National Competition Council has made a recommendation to the minister regarding the declaration, the minister must then make a decision on whether the infrastructure should be declared. The minister must make and publish that decision within 60 days of receiving the National Competition Council’s recommendation. Importantly, at the same time, the minister must notify the applicant and the infrastructure owner of the decision and provide both parties with a statement of reasons. There have been only two declarations to date, both covering cargo handling services at Sydney and Melbourne airports. The Productivity Commission report notes that, even though there have been few declarations, the threat of declaration has helped shape the access regime at state and territory level. Once a declaration has been made, the applicant who has applied for access has a legal right to negotiate on the terms and conditions of access and, if those negotiations are unsuccessful, the parties can seek to have the matter arbitrated by the Australian Competition and Consumer Commission.

Section 44M-44Q of the Trade Practices Act sets out a process whereby an access regime can be certified as ‘effective’. A party cannot seek access to a facility through part IIIA if the facility is an effective access regime. The only regimes that can be certified as ‘effective’ are state and territory government access regimes. The Trade Practices Act does not provide a certification process for Commonwealth government and non-government access regimes. For a regime to be certified, the minister in the responsible state or territory must apply to the National Competition Council for a recommendation about whether the regime is effective. The council must make a recommendation to the designated Commonwealth minister. Section 44M provides that the minister must then decide whether to certify the state or territory access regime as effective. The minister’s certification decision is reviewable by the National Competition Tribunal. If a facility has been certified ‘effective’, the party seeking access to the facility must use the state or territory access regime. If the facility has not been certified ‘effective’, the access seeker may either rely upon the state or territory access regime or apply for the facility to be declared and access negotiated under part IIIA.

Certification provides all parties with certainty about how access will be regulated. While this benefits access seekers, it is also crucial for infrastructure operators and developers, particularly in relation to new investment. It is noteworthy that certification can only be used by state and territory governments. Other entities wishing to achieve certainty in the status of their access regime must lodge an undertaking with the Australian Competition and Consumer Commission.

A new objects clause is inserted into part IIIA to provide for greater certainty for infrastructure owners, access seekers, investors and other interested parties. The bill also requires decision makers under part IIIA to have regard to the objects clause when making their respective decisions. This will help promote consistency and provide guidance in relation to each decision maker’s approach, thereby enhancing regulatory accountability. The government has also agreed that statutory pricing principles should be established in relation to part IIIA to provide guidance for pricing decisions and to contribute to consistent and transparent regulatory outcomes over time as well as certainty for investors and access seekers. This bill enables pricing principles to be determined by the Commonwealth minister.

The Australian Competition and Consumer Commission will be required to take into account those principles when making a final determination on an access dispute, when assessing a proposed new access undertaking access code and when considering whether to vary the terms of or extend the expiry date of an existing access undertaking or access code. The commission may also take such principles into account when making an interim determination on an access dispute. On review, the Australian Competition Tribunal will also be required to take the pricing principles into account where the tribunal is required to reconsider a decision of the Australian Competition and Consumer Commission. To ensure consistency in all three access routes under part IIIA, the Australian government will also work with participating jurisdictions to include the same pricing principles in clause 6 of the competition principles agreement for the purposes of assessing certification applications.

A number of changes will be made to the existing arbitration requirements in part IIIA. The Australian Competition and Consumer Commission will be given the discretion to conduct multilateral hearings in arbitrations following notification to the parties to the dispute. Such processes will allow the commission to consider the service in its entirety and could streamline administrative requirements and reduce costs. Provisions to allow parties to safeguard commercially confidential information and to require the commission to explain its reasons for conducting multilateral hearings against the wishes of the parties will enhance regulatory transparency and provide guidance for future multilateral arbitration hearings.

Consistent with provisions contained in the telecommunications access regime in part XIC of the Trade Practices Act, the Australian Competition and Consumer Commission will also be given the discretion to grant interim arbitration determinations. This change will ensure that appropriate outcomes, including the access seeker gaining access to the service, can be realised in the period leading up to the final determination by preventing an access provider from using the arbitration process as a strategy to delay providing access or to delay providing access on fair terms and conditions.

In another improvement, this bill enables access providers to lodge access undertakings and access codes with the Australian Competition and Consumer Commission after a service has been declared, which will provide a means for achieving certainty on access terms and conditions, thereby facilitating negotiations between access providers and access seekers. By increasing the incentive to negotiate for both parties, post-declaration undertakings should reduce recourse to arbitration, thereby reducing the burden on the regulator and the industry.

This bill also applies a number of non-binding target time limits to various decisions under part IIIA. While the time limits are not binding on the decision maker concerned, they oblige the decision maker to publish a notice of any extension beyond the target time limit, thereby providing regulatory transparency as well as increasing incentives for timely decision making. The new target time limits are: four months for the National Competition Council to assess an application and to make a recommendation to the designated minister that the service be declared or not be declared; 60 days for a ministerial decision to revoke a declaration; six months for the National Competition Council to assess an application and to make a recommendation to the Commonwealth minister that a state or territory regime for access to a service or proposed services is or is not an effective access regime or that the period for which a decision is in force be extended; 60 days for the Commonwealth minister to decide that a state or territory regime for access to a service or proposed service is or is not an effective access regime or that the period for which a decision is in force be extended; six months for the Australian Competition and Consumer Commission to assess a new access undertaking or access code or an application to vary, extend or withdraw an access undertaking or access code or an application to approve a tender process as a competitive tender process; six months for a final arbitration determination for a declared service by the Australian Competition and Consumer Commission; and four months for the processing of an appeal by the Australian Competition Tribunal.

This bill will also place additional obligations on ministers, the National Competition Council and the Australian Competition and Consumer Commission to publish reasons for their decisions or recommendations. This will enhance procedural transparency and regulatory accountability and will facilitate informed consideration of whether there are grounds to challenge a decision by way of merit review before the Australian Competition Tribunal or judicial review by the courts. The Australian Competition and Consumer Commission will also be required to publish reports on completed arbitrations for services declared under part IIIA. This bill sets out a range of minimum requirements to be included in the reports, but the specification of minimum requirements will not preclude the commission from reporting on a matter relevant to an arbitration, subject to the exclusion of confidential commercial information. Publication of arbitration reports will enhance regulatory transparency and may provide guidance for future cases.

As the government’s key adviser on the National Access Regime, the National Competition Council will be required to report annually on the operation and effects of the regimes, including on specific matters identified in this bill. The Australian Competition and Consumer Commission will also be required to include information in its annual report regarding the time it took to make certain decisions and to include information about decisions made under the new provisions in existing public registers.

In conclusion, this bill will improve the operation of the national access regime. Whilst many of the amendments are procedural in nature, they have scope to make the decision making process more efficient and effective. Many of the procedures will bring greater certainty and clarity to both access seekers and access providers, especially those initiatives dealing with the determination of access prices. Opportunities for delaying access through delaying techniques will also be curtailed by the imposition of time limits on certain decisions. This is a practical amendment which seeks to provide practical outcomes. I commend this bill to the House.

Chris Hayes (Werriwa, Australian Labor Party) Share this | Link to this | Hansard source

I rise to support the opposition’s second reading amendment to the Trade Practices Amendment (National Access Regime) Bill 2005. Despite the victory of commonsense over pig-headedness when the government backflipped on the inclusion of pricing principles in this legislation, which has been the consistent position of the opposition, the government have nevertheless still been caught short. While they have reluctantly been dragged along in the debate and did finally concede that some pricing principles should be enshrined in this legislation, the government have been caught short because, quite frankly, they have squibbed on the bill. They have rushed to introduce some pricing principles and some parts of Labor’s position, but they did not have the stomach for the whole deal. Instead of accepting Labor’s amendment, the government have placed some principles in the bill but have certainly retained an escape clause. Granted, the escape clause is a little more difficult to use than leaving everything to the Treasurer’s discretion through a set of regulations; nevertheless, there is an escape clause.

In yet another example of the opposition leading the government on issues of national economic significance, some semblance of competition will finally be introduced in this bill. After four years of hand wringing about how it might respond to the report of the Productivity Commission, the government has come through with another half-baked effort. The importance of investment in infrastructure has received considerable attention of late as the Australian economy now starts to reach capacity restraints. Infrastructure is the veins and arteries of our economy. It is the roads, ports, railways, airports, powerlines, pipes and wires that allow people, goods, commodities, inputs and information to move efficiently between economic agents. Infrastructure is a critical source of our economic competitiveness. It represents the basic building blocks of our economy, and the efficient management of our infrastructure is critical to the long-term success of our economic progress.

But, Mr Deputy Speaker, you would not know the importance of infrastructure from the way this government treats it. Labor realises the importance of sound investment in infrastructure. We on this side of the House have realised that if you do not have the basics in place—if the building blocks are not right—you really are starting from behind. The Hawke and Keating governments realised the importance of efficient access to significant economic assets. The reforms of a decade ago were critical to boosting the competitiveness of the Australian economy, boosting economic growth and increasing the living standards of all Australians.

When I started my career I worked for Sydney Water. Of course, back then it was known as the Metropolitan Water, Sewerage and Drainage Board. It was set up as a monopoly and operated as one. During my time there nobody would have thought it possible for someone else to be able to use its network as part of their own business rather than simply using water provided by the network. At that time, natural monopolies were just that—monopolies.

Times have certainly changed and so has technology. The network businesses that were previously thought to be natural monopolies are now at a stage where more than one retailer can use the existing distribution network to deliver their product. The technological chains that allow access to network monopolies prompted the development of national competition policy and the Competition Principles Agreement. They led to the development of access regimes so that distribution businesses previously thought to be natural monopolies could become subject to competition. This led to cost reductions for businesses’ inputs and certainly cost reductions to residential consumers.

I do not remember the exact figures, but not too long ago I recall reading that small businesses in New South Wales had experienced a real reduction in their electricity costs in the order of 20 per cent. A similar reduction was experienced in port charges. Furthermore, there was about a 40 per cent reduction in rail freight charges. This is not to mention the impact that national competition policy has had on the cost of water, sewerage and gas. Not only is it business customers who benefit from these significant cost reductions but also domestic consumers benefit through lower prices for goods and services, and the Australian economy benefited as it became increasingly competitive on the world stage.

A significant proportion of the economic growth that we are experiencing today can be attributed to the micro-economic reforms introduced in the 1980s, of which competition policy was among the most significant. Fundamental to the reforms were the sound underpinnings of the Trade Practices Act and the Competition Principles Agreement. While it is important when setting about such reforms that businesses seek access to significant infrastructure assets and owners and operators of those assets have some certainty about how access arrangements will be developed and implemented, even more important, and critical to access decisions, is price. Pricing arrangements are the key determinant of the economic viability of a project. Access arrangements live and die by the pricing arrangements. Owners seek to maximise their revenue and return while those seeking access look to minimise their costs—a natural economic balance.

Price is critical to access arrangements, yet the government has not taken the issue seriously enough to introduce some real competition principles into this bill. While it will claim that its changes to the bill are a great achievement and are pivotal to the future of the economy, the truth is that it is selling the infrastructure short.

In the amendments to its own bill which the opposition has forced on the government, the government has left an escape hatch to be used in times of emergency—an escape hatch that will allow monopolists to dodge the rules and continue to extract monopoly rents and impose deadweight losses on our economy. The escape clause I refer to is in the government’s decision to include regulatory risk in its pricing principles. Regulatory risk is an interesting concept. It is often cited by those seeking to increase their prices to a level slightly above what would be regarded as economically efficient. Regulatory risk is used by companies to defend bloated pricing proposals by using the concept to pump values that are used in the calculation of appropriate rates of regulatory return.

Labor considers regulatory risk to be a concept that can be included in the pricing principles, while the government believes that regulatory risk must be included in the pricing principles. I am confident that over the coming years, because of the unwillingness of this government to truly commit itself to implementing full and proper pricing principles, we are sure to hear many debates about the level of regulatory risk associated with an investment. Monopolists will claim that they have a higher degree of risk for their entire investment and will use that argument in a false effort to boost the beta values, which will become so important in the calculation of rates of return. The argument they will use to boost the beta values used to calculate the required economic return will feed through to the final price and be passed on to consumers.

Regulatory risk should be included as only a subclass of commercial risk and not a separate class of risk. The government has not had the courage of its alleged competition convictions on this, and that is why the Labor amendment should be adopted. I find it particularly concerning that these amendments introduce potential for the granting of immunity from declarations. Under these amendments, immunity may be granted to new infrastructure projects that have been developed through competitive tendering processes. The minister noted in his second reading speech that this is because competitive tendering processes are likely to see the removal of the potential to extract monopoly rents. While I agree that it is likely that the potential to extract monopoly rents from these projects will be minimised through the use of competitive tendering, it assumes that infrastructure is tendered for and built in a highly competitive market. However, if the market is not highly competitive, the potential for the successful tenderer to extract monopoly rents remains. It may be somewhat reduced, but nevertheless it remains.

While the amendments in this bill are cause for concern, I cannot help but wonder how these changes will mesh with the recent decision of the Council of Australian Governments and the findings of the Prime Minister’s Exports and Infrastructure Taskforce. Any examination of such issues must necessarily examine the effectiveness of current regulatory arrangements. The taskforce report makes interesting reading. It says that regulators have been too focused on removing monopoly rents. I find that extraordinary because, as I understand it, part of the purpose of the regulation of monopolies is to reduce the scope to extract monopoly rents. Continuing to allow the extraction of monopoly rents is in direct conflict with trying to produce a competitive and efficient economy. It seems that, in the interests of speed rather than getting the process right and having inefficiencies removed, it is better to settle for reasonable access arrangements than to settle for ‘near enough is good enough’.

Based on the previous statement of the government, I would have thought that entering into reasonable access arrangements, which would no doubt include reasonable pricing arrangements, would result in some monopoly rents continuing to be extracted and would accordingly result in an artificially inflated input cost. Hence, exporters in this country would be left at a competitive disadvantage. I find it odd that the Prime Minister’s taskforce would recommend an approach which would result in exporters being less competitive, which flies in the face of the government’s objective of doubling the number of exporters by this year.

The minister’s second reading speech claims that this bill is consistent with the recommendations of the taskforce. However, they certainly cannot be considered to be consistent with the findings of the COAG review of national competition policy. That is likely to be a hot topic for debate when the Prime Minister meets the premiers, possibly later this week. Importantly, after considering the issues surrounding infrastructure, COAG last year at least acknowledged that the process of reform must continue. It said:

It is important not to be complacent about the continued performance of the Australian economy. Resting on the achievements of the last decade will cost the Australian community opportunities for greater prosperity.

Australia’s productivity performance is under threat, with further reform essential if the economic expansion of the last 14 years is to continue.

So while the collaborative efforts between the states, the territories and the Commonwealth are being developed, we stand here today debating amendments to a system of rules that govern access arrangements without reference to or knowledge of the findings of that COAG review.

Debate interrupted.