Forum of Federations and CD Howe Institute Conference, Toronto, 1 February 2010

Addressing Internal MarketBarriers and Integration:

The Australian Experience

Cliff WalshSchool of EconomicsUniversity of Adelaide

South Australia

Forum of Federations and CD Howe Institute Conference, Toronto, 1 February 2010

AUSTRALIA

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1. CONSTITUTIONAL CONTEXT

2. WHY COOPERATIVE ECONOMIC REFORMS

3. WHAT REFORMS?

4. HOW ACHIEVED?

LESSONS FOR CANADA?

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CONSTITUTIONALCONTEXT

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• COMMONWEALTH POWERS:FEW EXCLUSIVEMANY MORE CONCURRENT, WITH

FEDERAL PARAMOUNTCY

• STATES HAVE RESIDUAL POWERS COVER MOST ECON ACTIVITY

AND INFRA PROVISION

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• “ECONOMIC UNION” PROVISIONS:

CUSTOMS UNION: EXCLUSIVE COMMONWEALTH POWER (s90) OVER CUSTOMS AND EXCISE DUTIES

COMMON MARKET: s92

“… TRADE, COMMERCE AND INTERCOURSE BETWEEN THE STATES … SHALL BE ABSOLUTELY FREE”

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• s92 ONLY PRECLUDES

“DISCRIMINATORY BURDENS OF A PROTECTIONIST KIND”

• CONSTRAINS REGULATORY DIFFERENCES

BUT DOESN’T NECESSITATE HARMONISATION

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• USE OF MOST CONCURRENT POWERS UNCONTENTIOUS BUT NB

EXTERNAL AFFAIRS POWER: CAN OVERIDE STATE LEGN

CORPORATIONS POWER: CAN EVEN REGULATE MATTERS INTERNAL TO CORPORATIONS

GRANTS (SPENDING) POWER:

REWARD STATE REFORM ACHIEVEMENTS

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• CONSTITUTIONAL CHANGE UNLIKELY

• REFERRALS COOPERATIVE BUT PRACTICAL AND POLITICAL LIMITS

• OTHER MEANS RELIED ON: TEMPLATE LEGISLATION MIRROR LEGISLATION FRAMEWORK LAWS SIMPLY IGAs

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THE WHY, WHAT

AND HOW OF

AUSTRALIA’S COOPERATIVE

ECONOMIC REFORMS

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WHY?

•ECON CRISIS: UNILATERAL TARIFF REDUCTIONSINTENSE PRESSURE FOR DOMESTIC ECON REFORMSSTATES’ PARTICIPATION BECOMES ESSENTIAL

•ECON AND POLITICAL BENEFITS ALL-ROUND

•2+ DECADES & STILL GOING11

WHAT?

•DETERMINED SOLELY BY WHETHER INCREASES COMPETITION ETC

PRESUMPTION IN FAVOUR OF COMPETITION BUT COULD BE REBUTTED

FOCUS CHANGES OVER TIME

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PHASE 1: 1990s

• STARTS MODESTLY EARLY 90s: INFLUENCED BY EU

MUTUAL RECOGNITION AGREEMENT ETC.

• BUT NB ALSO PERFORMANCE MONITORING OF GBEs

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• 1995-2005 COMPREHENSIVE NATIONAL COMPETITION POLICY (NCP). KEY ELEMENTS:

REFORMS TO PREVIOUSLY SHELTERED GBEs: ESPECIALLY ELECTRICITY, GAS, WATER

WIDE-RANGING LEGISLATION REVIEWS : TO REMOVE ANTI-COMPETITIVE LEGISLATION

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• OTHER ELEMENTS INCLUDED:

WIDENED COVERAGE OF TRADE PRACTICES ACT

COMPETITIVE NEUTRALITYSEPARATION OF REGULATORY

FROM COMMERCIAL FUNCTIONSVERTICAL SEPARATIONTHIRD-PARTY ACCESS REGIMES

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• SOME INTERNAL MARKET REFORMS BUT NOT HIGH PRIORITIES: E.G.

MORE UNIFORM APPROACH TO REGULATING TRUCKS

NATIONAL INTEGRATION OF INFRA PROVISION

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PHASE 2: AGREED 2006

•NATIONAL REFORM AGENDA (NRA)

•REGULATORY REFORM STREAM

“TO DELIVER A SEAMLESS NATIONAL ECONOMY”

REDUCE FRAGMENTATIONIMPROVE REGN-MAKING & REVIEW

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• INITIALLY 10 PRIORITY AREAS

PRODUCTIVITY COMMISSION: INCREASE GDP BY 1.33%?

• SOME ISSUES IN CANADA NOT IN AUSTRALIA

• NOW 27: IN SUMMARY:-

GREATER INTEGRATION OF LABOUR MARKETS: PROMOTE MOBILITY & SKILLS ACQUISITION

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REGULATION OF SAFETY & OTHER STANDARDS

CONSUMER INFORMATION AND PROTECTION

STREAMLINE GOVT APPROVAL AND COMMUNICATIONS PROCESSES FOR BUSINESSES

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• BENEFITS > THAN +1.33% GDP

• REFORMS TO REGULATION-MAKING AND REVIEW IMPORTANT

FOR MOST BUSINESSES, EXCESSIVE REGULATIONS

• OTHER NRA REFORMS INCLUDE WORKFORCE PARTICIPATION & PRODUCTIVITY

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HOW? & LESSONS FOR CANADA?

1.VITAL: SEPARATE INTERGOVTL FORUM – COAG

2.ALSO: DRIVEN & MONITORED BY FIRST MINISTERS

3.REFORMS ARTICULATED AS ABOUT COMPETITION PRODUCTIVITY LIVING STANDARDS

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4. BROAD-BASED PACKAGES

MUTUALLY REINFORCING ITEMS

REDUCING INTERNAL BARRIERS ONLY IF HIGH BENEFITS

TAILOR-MADE IGAs FOR EACH PACKAGE & COMPONENT

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5. STATE PREMIERS: SEEN AS NATIONALLY SIGNIFICANT

LITTLE OR NO FINGER-POINTING AT PAST “PAROCHIALISM”

6. SENIOR OFFICIALS GROUP STABILISED PROCESSES WHEN POLITICAL TENSIONS

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7. REFORM PRIORITIES ESPECIALLY INFLUENCED BY

BUSINESS COMMUNITY (BCA)

PRODUCTIVITY COMMISSION

8. WHERE POSSIBLE, SET OUT OBJECTIVES AND GENERAL PRINCIPLES

STATES LEFT TO IMPLEMENT TO SUIT LOCAL PREFERENCES

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9. COMMITMENT OF STATES SUSTAINED BY REWARD PAYMENTS

PROGRESS ASSESSED BY INDEPENDENT AGENCY

RESULTS DISPROPORTIONATE TO REWARD $s AVAILABLE

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10. TRANSPARENCY

COMMUNIQUÉS FOLLOW ALL COAG MEETINGS

BACKGROUND PAPERS RELEASED

ASSESSMENTS OF PROGRESS MADE PUBLIC

PC PUBLIC INQUIRIES

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OUTCOMES ACHIEVED

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• PC REVIEW OF NCP (2005)ESTIMATED +2.5% GDP FROM INFRA

REFORMS ALONE

• ALSO CONTRIBUTED TOPRODUCTIVITY GROWTH SURGE:

OECD GDP PER CAPITA RANK BACK TO 8TH (18TH LATE 1980s!)

TRADE/GDP RATIO TO OVER 45% (20% EARLY 1980s)

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• CURRENT REFORMS PROJECTED TO INCREASE GDP BY

1.33% REGULATORY REFORMS AFTER 10 YRS (ONLY 10 OF 27)

6% INCREASED WORKFORCE PARTICIPATION. 3% INCREASED WORKFORCE PRODUCTIVITY

− BUT N.B. AFTER 25+ YEARS, AND POSSIBLY LARGE IMPLEMENTATION COSTS

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• SHOULDN’T OVERSTATE

RAISED PRODUCTIVITY RELATIVE TO U.S.A.’s

HOWEVER, ONLY TO 76% AND STILL BELOW 1950 LEVEL

• MUCH YET TO BE DONE!

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