ABC MELBOURNE WITH RAFAEL EPSTEIN
WEDNESDAY, 23 AUGUST 2023
TOPICS DISCUSSED: Competition review, Noncompete agreements, Productivity growth.
RAFAEL EPSTEIN (HOST): 22 minutes after 4 o'clock on ABC Radio Melbourne. Andrew Leigh is the Assistant Minister for Competition, also Charities and Treasury. Good afternoon.
ANDREW LEIGH: Good afternoon, Raf, great to be with you.
EPSTEIN: Should I fear this competition review will lead to something as significant as the sale of the Commonwealth Bank and Qantas?
LEIGH: We’re not aiming to break up firms or divest them, Raf. We’re just aiming to get more competition into the market, to make sure that new entrants are coming in not just for the ambition of being bought by the monopolists, but by the ambition of actually taking them on. Whether it's banking or baby food or beer, the Australian economy is a pretty concentrated one and it's become more concentrated over recent decades.
What the review about is in the short‑term, making sure we've got competition that puts downward pressure on prices and helps with the cost‑of‑living challenge, and in the long‑term making sure we have the sort of dynamic productive economy that creates well‑paying jobs and lays the foundations for productivity growth.
EPSTEIN: The issue though, Andrew Leigh, and I know you actually probably have studied this more than I have, you know this stuff well, no one thought Fred Hilmer's look at competition policy was going to lead to flogging off all the electricity and the water and the airline and the bank and Telstra. These things can lead to unexpected places.
LEIGH: Well, Raf, that wasn't part of National Competition Policy, although it was, I acknowledge, happening at around the same time. Indeed, there's been a rethink among some economists about making sure that those privatisations don't simply see the sell off a government monopoly going into private hands.
LEIGH: A badly managed privatisation can mean the taxpayer gets a big revenue shortfall, they get revenue in the short‑term, but in the long‑term, pay higher prices. So we need to make sure that we're not carrying out privatisations like that into the future.
But then there's a whole new digital agenda right now. So these digital platforms acting as gatekeepers to a whole lot of essential parts of our Australian economy.
There's the noncompete clauses. One in five Australian workers has a clause in their employment agreement that makes it harder for them to switch to a better-paying job. Not just tech executives but also early childhood workers and the hairdressers are being impeded by noncompete clauses from moving employer.
EPSTEIN: Childcare workers have noncompete clauses?
LEIGH: Yes, absolutely. The fact is that no one ever negotiates over their noncompete clause because effectively having a conversation about that is to have a conversation at the start of the relationship about how the relationship might end. So employers stick them in and employees don't object to them, but then they impede competition.
One of the new things that economists have been recognising in recent years is that more competition isn't just good for consumers, it's good for workers as well.
EPSTEIN: Is this Government going to have the guts to actually do something about competition though?
LEIGH: Absolutely, and we already have. We've already raised penalties for anti-competitive conduct and banned unfair contract terms. So this is continuing our reform agenda, very much in that Keating legacy as you've pointed out, Raf. Competition is fundamentally a Labor issue because when there's uncompetitive markets it's the most disadvantaged who are hurt the most. If you don't have a car ‑‑
EPSTEIN: One of the people looking at this ‑‑
LEIGH: ‑‑ you can't drive down the road for a better deal.
EPSTEIN: Forgive the interruption, but one of the people looking at this is Rod Sims who used to run the Competition and Consumer Commission. He's already got some ideas; I mean he's made lots of recommendations. Why get him to look at it again? Why not just implement what he said in the past?
LEIGH: Well Rod Sims is going to be as part of the advisory panel, alongside Danielle Wood, the CEO of the Grattan Institute and also a fine competition thinker. We're looking at reforms which will be rolling out over time. We’re not looking at a door-stopper report coming down in a couple of years. We're looking at spinning off reform ideas as they come up. And so you can expect ideas large and small to come out of this. We're also encouraging States and Territories to ‑‑
EPSTEIN: Do we want the large ideas?
LEIGH: Absolutely, yes. And we need to be thinking about competition in a holistic sense. There's a lot of careful thought going on overseas, the United States, Europe and the UK, recognising that some of these large digital firms really are dominating significant sectors of the economy and competition law needs to keep up.
We've also got much better data than we used to, Raf. So this conversation used to be a real theory-based conversation. Now there's a lot more numbers because big data allows us to actually see what's happening in the market. A lot of the picture is pretty concerning.
EPSTEIN: I want to get back to that question of whether or not this Government's got the guts to do something real. Can you really say right now that someone listening is going to really feel the difference, feel some significant competition against Coles and Woollies and feel like they've got a real alternative with a phone company or a bank? Is that really where this is going to end?
LEIGH: Well productivity isn't something that Government just slices up like a cake and hands out. It's about creating an environment in which entrepreneurs can thrive. So, it depends both on the government and also on entrepreneurs coming in to fill those gaps. But I want to see entrepreneurs who are starting up businesses, not just with the aspiration of being bought by a major but actually taking on the major. You think about tech firms like Atlassian and Canva which are aiming to carve out a market niche, not simply looking to be acquired. I was slightly worried when I was in the airport bookstore the other day and there was a book there that was titled "How to Build a Business Others Want to Buy", and I thought gee, that's not what we want with our business sector. We actually want firms that are taking on the incumbents and offering consumers and workers a better deal.
EPSTEIN: Although you mentioned Atlassian and Canva, so Atlassian's basically I guess the way you digitally set up your company, Canva's about the design you use electronically. They didn't need any help from governments, in fact, they probably didn't get any help from government. What is going to be your marker of success? Will it be a third supermarket or a fifth bank? How will you know the competition policy review has succeeded?
LEIGH: I'd like to make sure market concentration isn't getting worse, that we don't have markups increasing. I'd love to see more start-ups in the Australian economy. Our start-up rate has been stopping and that is a real concern not only for the business sector but also for workers who benefit when there's more firms that are looking to employ them. Productivity growth is fundamentally driven by having more firms and more dynamism coming into the economy. I worry, Raf, when you look at our sporting codes, there's a huge lot of dynamism out there, you know, epitomised by the Matildas but pretty much any sporting code you want to follow, you've got a dozen teams you can choose from. And yet when you're a consumer often you've only got two or three choices. So an economy that is as dynamic as our sporting teams would be a great goal to aim for.
EPSTEIN: Just to get back to the gutsiness question, the Intergenerational Report's tomorrow. I know the Treasurer, your colleague, is in charge of that but we need to drastically change the way we tax. Workers are going to be providing the lion's share of tax, not companies, not GST. This Government has essentially said it doesn't have the guts to make a big change to tax policy. Why should we believe you're going to do something big on competition policy?
LEIGH: Well that's just not right, Raf. I mean we're out there putting in place significant reforms on multinational taxation. We've got the thin capitalisation measures and the transparency measures, they've gone through the House --
EPSTEIN: Aren't they both like a couple of billion here or there?
LEIGH: -- and are now in the Senate. Well, a billion is not a small number, Raf, and there's more to come ‑‑
EPSTEIN: It is when your budget's hundreds of billions.
LEIGH: Well it's a part of our reform agenda. There are also the changes to the petroleum resource rent tax. There'll be more to come as we look to implement the OECD/G20 Two Pillar agreement. We're serious about making sure that multinationals pay their fair share. The Coalition were willing to let multinationals off scot-free. We recognise that there is a public responsibility for firms who benefit from public infrastructure to pay their fair share of tax and that doing business out of a tax haven just is no longer on. So the global 15 per cent floor on company tax really does stop that race to the bottom on company tax that's deeply damaging to Australia.
EPSTEIN: Maybe we end on one glaring example of a lack of competition. Some international airlines, Qatar, they want more flights here; Qantas doesn't. Wouldn't the Government show it's open to competition and open to bold ideas to let other airlines have more flight routes into Australia?
LEIGH: Well we are doing that. I mean Qatar is just one carrier, but Emirates, Qantas ‑‑
EPSTEIN: Well they haven't got what they want.
LEIGH: That's certainly true. They would have liked more routes but Emirates, Qantas, Cathay have announced significant capacity increases. There's Singapore and China Southern that have announced more new flights to Australia. We're expecting applications from Vietnam Airlines and Turkish Airlines coming in the coming months.
So we are concerned about airline competition and the Aviation Green Paper will look at issues of competition, including the important international market. Make no bones about it, it's critical for the tourism sector, for the business sector to get more airline competition. Catherine King is very much across those challenges.
EPSTEIN: Thank you for your time. It'd be great to talk to you more about the competition stuff as those ideas bubble up from Rod Sims and Danielle Wood. Appreciate your time.
LEIGH: I'd love that. Thanks Raf.
EPSTEIN: Andrew Leigh. We didn't get to monopsony this time; we learnt the word monopsony last time Andrew Leigh took some calls. He's the Assistant Minister for Competition, Charities and Treasury. Monopsony's kind of like monopoly but it's different. Look it up. I learnt so much last time we had a chat. In fact I learn every time Andrew Leigh's on the show.