A sharp division has emerged between the Australian Competition and Consumer Commission (ACCC) and Competition Minster Andrew Leigh over the need for action to improve the performance of the Australian economy.
In a speech to be delivered Thursday night at Australian National University honouring the late Fred Gruen, Leigh will present a compelling case for change.
“Low productivity growth and declining competition are key long-term issues facing the Australian economy,” he will say.
“Over recent decades, there have been a number of significant changes in the Australian economy. The job-switching rate has fallen. The business start-up rate has declined. The largest firms have increased their market share. Mark-ups have increased. All this suggests that the Australian economy has become less competitive.”
Leigh will note that the annual start up rate for new businesses had fallen from 8.7% in the six years to 2008, to 7.3% in the decade ending 2019. The exit rate had also fallen.
ACCC chief Gina Cass-Gottlieb would not disagree with Leigh; it’s the level of urgency that is different — plus his backing of the new US school that wants competition policy to look wider than consumer prices in testing the law.
Cass-Gottlieb argues this wider view is already written into the Australian law and policy.
In his speech, Leigh notes the top four firms in the different sectors in Australia tend to be a constant, saying “its getting sticky at the top”.
The top firms are also exercising more pricing power, he says.
In contrast, Leigh says “competitive pressures encourage firms to improve quality and offer attractive prices”.
“We also help competition when we encourage investors to back productive new opportunities instead of parking wealth in existing assets. Lowering financing frictions will allow funding to flow to new and innovative firms, which in turn will challenge incumbents.
“Competition encourages firms to innovate in their business processes, and use their staff more effectively. In competitive industries, companies are forced to ask themselves what they need to do to win market share from their rivals. That might lead to more research and development, the importation of good ideas from overseas, or adopting clever approaches from other industries.”
Competition lawyers are looking to Cass-Gottlieb’s speech on September 9 to learn just how she will operate as ACCC boss. She will be followed onto the podium by Leigh at the annual Law Council conference in Sydney.
John Durie has been a business reporter for 40 years, starting his career in the Canberra Press Gallery in 1980. John worked for 13 years as Chanticleer Columnist for the AFR, four years as business columnist for the New York Post, and also worked in Paris.
