Daniel Mulino (Fraser, Australian Labor Party) Share this | Link to this | Hansard source

On behalf of the Standing Committee on Economics, I present the committee's report, incorporating dissenting reports, entitled Better competition, better prices: report on the inquiry into promoting economic dynamism, competition and business formation, together with the minutes of the proceedings.

Report made a parliamentary paper in accordance with standing order 39(e).

by leave—I am pleased to be able to table Better competition, better prices. Competition and economic dynamism underpin everything we do in our daily life, whether it is shopping at the local supermarket, using our credit card to make a payment, using an app on our mobile phone to buy an airline ticket or to obtain the latest news, and so much more. Some of the most important decisions we make in our life, such as taking on a mortgage to buy a home, are also heavily influenced by the level of competition and dynamism in the economy.

Competition puts downward pressure on prices, as firms battle each other for our business. Competition also leads to better service. The more companies in any one sector, the harder that businesses must work to retain customers and secure greater market share. Economic dynamism includes such factors as the rate of new business formation; the efficient allocation of capital and labour; well-designed regulation; and the development of new factors of production, including skills.

Australia has one of the highest living standards in the world. That was built on the back of decades of high productivity growth. However, the data is showing declining competition and dynamism, as measured by the high market share of leading firms, the profit margins in key sectors and a declining rate of firm entry and exit in some sectors.

Australia needs to lift its game when it comes to competition and economic dynamism because together they drive innovation, which, in turn, drives productivity. In the short-term, this will put downward pressure on prices, thereby improving the cost of living. It will also place a check on poor corporate behaviour towards consumers. In the long run, it will drive higher productivity growth. If we don't tackle this challenge, future generations will be far poorer than they might have been.

This report puts forward practical steps that will help turn things around. Importantly, all 44 recommendations in the report and dozens of key findings were all adopted unanimously. This represents all sides of parliament working together constructively. I would like to acknowledge the positive, cross-partisan approach of all those committee members—government members, and those from the crossbench. It's not something to be taken for granted.

Some of the key outcomes in the committee's 44 recommendations include: key findings in relation to rigorous measures of competition and dynamism within our economy, pointing to some concerning overarching trends; recommendations aimed at bolstering the quality of and access to economic and market data collected by government agencies; recommendations to improve competition policy, including strengthening our mergers laws and better regulating non-compete clauses; recommendations for pilot programs and improvement in mortgage and deposit products from banks—so important in people's lives, particularly to achieve better outcomes for passive consumers or consumers with low financial literacy—and also measures to introduce new, more transparent products, such as tracker mortgages and innovative funding products to create a more level playing field across large and small banks; measures to improve regulation of the financial services market, including the payments system, and a regulatory grid, which we're pleased to see the government has taken positive action on in recent times; recommendations to reduce red tape for growing businesses and to better design regulation overall; recommendations to improve government procurement, including a social procurement framework starting with accreditation and procurement processes that give better access to social enterprises and to SMEs; better designed markets for the delivery of key social services, including the NDIS, Workforce Australia, skills and aged care, which would build on best-practice, cutting-edge economic theory already being applied in many contexts, including environmental offset markets, transport markets and student placements; and recommendations for improvements in digital platforms, the aviation sector, retail markets and the interoperability of markets within the economy.

The committee's wide-ranging and comprehensive report is the culmination of 14 months of evidence gathering and analysis from numerous sectors of the economy. The committee received more than 60 submissions from stakeholders across industry and government, and followed up with many stakeholders and other experts during over 18 days of public hearings. The House economics committee has a very busy schedule with its normal hearings into key organisations' annual reports, including the RBA, the big four banks and key regulators—so running this inquiry on top of that has been very taxing on the secretariat.

I thank all members of the secretariat. Knowing that it's always risky to single one person out, can I particularly acknowledge Lachlan Wilson, who was the committee secretary until just a few weeks ago. He devoted a considerable amount of time to this inquiry in organising many public hearings and through his rigorous analysis and writing. I also acknowledge the enormous contribution of Samantha Mannette, who, tragically, passed away earlier this year. She worked extremely hard on this inquiry and across the committee's entire workload, and brought a great deal of experience and wisdom.

I conclude by saying Australia is at a crossroads. This report identifies the many opportunities at an economy-wide and a sectoral level for meaningful reform that will not only produce immediate benefits for consumers but also deliver higher standards of living for future generations. I commend the recommendations in this report and the information that informed them to both government and market for a way forward for the betterment of the Australian economy and society.

Garth Hamilton (Groom, Liberal National Party) Share this | Link to this | Hansard source

by leave—I thank the chair of the committee, the member for Fraser. This was a very broad-ranging report that we engaged in, and his work in directing us towards an outcome required some work. I thank him for his collegiate approach and thank him very much for coming to Toowoomba, the home of Australia's ninth-largest bank—Heritage, now People First. I thank the secretariat for all their hard work, particularly Lachlan Wilson, and I recall the memory of Samantha Mannette in her contributions, as was very well done by the chair.

At a time when Australians and Australian businesses are experiencing cost-of-living pressures, the findings of this inquiry are more critical than ever before. Improvements to Australia's competitive environment, such as more efficient supply chains, reduced regulatory barriers, appropriate regulatory frameworks and flexible employment arrangements, may help to address high inflation and falling productivity. I commend the chair and his willingness to engage with the smaller and customer owned banks—a sector very important to me. It is very pleasing to see bipartisan and cross-party support in this area, and I believe it's already been very beneficial.

The issue of a regulatory grid was regularly raised during the inquiry as a practical step the government could take to enable more competition in the banking sector where smaller banks simply do not carry the overheads of bigger banks and are required to navigate blindly through heavy regulatory change. We heard time and again how this step had been successfully taken overseas without detriment to the usual political process of regulatory improvement and reform. I think the fact that the government has decided to take the initiative and move ahead with this issue should serve as a point of pride to the chair and the committee. Our work together delivered results even before we laid down our tools.

From the evidence provided, the recommendation that banks should clearly notify retail deposit holders of changes to their interest rates and changes to the eligibility requirements for bonus interest rates must be pursued and supported by government, opposition and the crossbench in the future. That this practice exists and was widely covered demonstrates that an asymmetry of information is being exploited to the detriment of Australians, and there is no justification for that to be allowed to continue. On funding costs, the recommendation that APRA examine the suitability of macroprudential regulation for medium and smaller banks, particularly the capital holding requirements, was well supported in testimony that was given.

Given the success of the committee in reaching bipartisan support for previously mentioned sensible recommendations, it was my inclination to keep the focus of the committee's report there. These are very good steps. They will make tangible improvement to competition in our banking sector and they deserve the spotlight. I have thus chosen to provide not just any recommendations but, rather, additional comments that I feel are relevant. I note that all of these points are based on evidence provided to the committee.

In seeking improvements to competition and economic dynamism, it's important to understand the impact of declining productivity and significant industrial relations reform. Productivity has fallen by 5.4 per cent in the past 21 months—the largest fall we've ever recorded. The Business Council of Australia said:

There are many underlying reasons for this loss of economic dynamism. They include … increased uncertainty (including over government policy), dwindling foreign investment … a rigid and heavily regulated labour market, a heavy burden of tax and regulation …

On all of these points, there is a role for government to play. However, following the government's second budget, the Parliamentary Library researchers could not find a single substantive program within the budget papers to boost economic productive capacity. The report said, 'There's little detail on how government is going to achieve a boost to productivity growth.' A year on, a year worse off, the government again has the opportunity to address that with its third budget.

On industrial relations, the committee heard evidence, including from the Minerals Council of Australia, on the negative impact the government's IR reforms will have on productivity, competition and economic growth. Given the role that this industry had in underwriting the government's last budget, these concerns should be taken seriously. The lack of consultation about these laws that the Minerals Council described was alarming. Australia needs a modern workplace relations system that delivers a safety net for workers, recognises the shared interests of managers and workers in the enterprise's success and gives all enterprises the agility they need to compete and succeed. Centralising decision-making to the Fair Work Commission and handing power to unrepresentative unions will not fix this.

Where to next? A good committee report leads the parliament towards its next field of opportunity, and I think that is one of the best aspects of this particular report. Australia has concentrated markets in multiple industries, particularly in banking. According to Forbes, our four major banks are among the world's largest banks by market capitalisation and are also some of the most profitable in the world. Pursuing further competition in our banking sector means pursuing corporate diversity. Regulators should be held responsible for ensuring that a wide range of corporate providers are available to consumers, including cooperatives and mutuals. Competition policy should support the inclusion of these options going forward. Further taxation settings for mutuals should reflect the value that they provide to the greater society.

Again, I commend the chair on his excellent leadership through this wide-ranging report. I'm very happy to see the recommendations come through and receive support across the party. I do believe they will play a part in delivering the better competition and better prices that they set out to achieve.

Allegra Spender (Wentworth, Independent) Share this | Link to this | Hansard source

by leave—Thank you to everyone who contributed to this inquiry, with a special commendation to the chair and deputy chair, the secretariat and my colleagues on the committee. A dynamic economy is one where every Australian can fulfil their potential, where life is rich with opportunity, where our society is diverse, cohesive and fair and where every Australian enjoys a high standard of living and can access world-class services they need. But the evidence is suggesting that our economy is not performing as well as we might hope. In the last decade, GDP per capita growth has been just 0.6 per cent per year and labour productivity growth has grown at its lowest rate for six decades. While the wealth of retired generations has grown handsomely, the wealth of younger generations has stagnated.

These are real concerns, so it's appropriate that the committee has inquired into the topic of competition and dynamism and sought out opportunities for Australia to lift its game. The majority report is a thorough inquiry into competition issues and makes a large number of sensible, strategic recommendations, including on things like the use of public sector data and competition infrastructure, and has a focus on public sector procurement so that all firms can thrive. One particularly important part of the report is access to capital for startups, small businesses and dynamic, growing firms, because young firms are critical for productivity growth. They identified issues in funding, including the FIRB process and the superannuation performance test, as well as challenges in accessing bank finance. I strongly support the recommendations of the report, but I also believe we need to go further to address critical economic challenges we are facing, so I've provided some additional comments and recommendations.

To start with, the report is mainly silent on industrial relations and tax. These are very significant drivers of productivity in our economy, but both issues have become bitterly politicised. I think we need a sensible centrist, stable approach that prioritises productivity and dynamism. I recommended some institutional reforms such as establishing a tax reform commission and tasking the Productivity Commission to review the impact of our industrial relations settings, as well as other specific changes such as government incentives to reduce stamp duty.

The main report acknowledged that government regulation can both drive competition and dynamism as well as hinder it and made recommendations on the government's work on regulation rightsizing as well as specific regulation recommendations on particular industries. All of these recommendations are extremely important. I also acknowledge that the challenges of rightsizing regulation are so significant that we may need even further support, including asking the Productivity Commission to identify priority areas for regulatory review and establishing a minister for better regulation, learning from the experiences of the New South Wales government, to lead a complete overhaul of our regulatory approach. In my comments I also highlighted how climate affects dynamism and also focused on how we can increase the diffusion of innovation, which is so important to raising dynamism across all firms in our economy.

Finally, in discussions on dynamism there is so often a focus on business and bad actors, on rent-seeking. This is all absolutely appropriate, and it was an appropriate focus of much of the report. But I believe there is far too little looking in the mirror on the role of government and the public sector in holding back dynamism through its own services, actions and decision-making. I commend the main report, which identified that increased government transparency can improve the dynamic effects of the government sector, but I also believe we can go further. I believe that government should make sure that it relies on cost-benefit analyses when it assesses infrastructure investments and develop a broader, effective evaluative framework to more broadly assess government spending. I believe and recommended that the government should also appoint a minister for customer service, again learning from the experiences of New South Wales, to drive a changing culture so that businesses and citizens are at the heart of government practices, including through things like establishing a federal small business and codes list. Finally, I believe the government should commit to respond to and publish the responses to all inquiries and reports so that the time that committees like ourselves, but also members of the public, have put into inquiries across the parliament is not wasted.

My overarching message to the government is that now is the time to address economic dynamism. The Treasurer has indicated that his priority is to start to moving from fighting inflation to starting to drive growth, and I believe that, if we undertake the right economic reforms, we can do both. I acknowledge that the government has made some great progress in things that drive dynamism, including its focus on competition, reforms to skilled migration, increasing apprenticeships, and its recent commitment to the regulatory grid, which was an important part of the recommendations of the report. It is great to see the government already taking action on this. However, I do not think we are doing enough to address the challenges we face or to address the opportunities we can see.

We have been a lucky country, but we also need to make our own luck. I urge the government to proactively address the recommendations in the report, including those I have raised in my additional comments, and to present to this House how they will act on them with alacrity. Economic dynamism is not just an idea. It drives the quality of our lives. It underpins the wonderful services that we can access in Australia. It drives the economy in such a broad way that allows all Australians to thrive. The time to act on it is now, and I commend this report to the House.

Daniel Mulino (Fraser, Australian Labor Party) Share this | Link to this | Hansard source

I move:

That the House take note of the report.

Ian Goodenough (Moore, Liberal Party) Share this | Link to this | Hansard source

In accordance with standing order 39, the debate is adjourned, and the resumption of the debate will be made an order of the day for the next sitting.