Andrew Leigh

TURNBULL BACK FLIPS ON ECONOMIC POLICY WITH BAD EFFECTS

By supporting the ‘effects test’, a deeply divided Cabinet has come to a decision today that will chill innovation and investment. The only beneficiaries of this decision will be lawyers.

Malcolm Turnbull has totally capitulated on the effects test after earlier arguing against it.

Twelve months after the Harper Review was released and following a Cabinet brawl, the Government has adopted a thoroughly bad piece of economic policy.

Labor has consistently opposed an effects test, which will threaten legitimate competition and see higher consumer prices.

The Prime Minister talks a lot about innovation in the economy. Yet Australia’s largest employer, Wesfarmers, said in its response to the effects test that it is deeply concerned about the negative impact of an effects test on investment, innovation and growth.

These are the big questions for Treasurer Scott Morrison as a result of this decision:

• How much will food prices increase because of this new red tape?
• What impact will this have on forward investment?
• How many jobs will be affected?

Introducing an effects test will harm the Australian economy. This is bad policy. 

Even the Abbott government thought this was a bad idea, with the former Prime Minister describing the cabinet debate as “theological”. Joe Hockey and George Brandis, with the support of other senior ministers, refused to endorse effects test knowing full-well it would create a lawyers’ picnic.

All this is about is rushing through ill-conceived policy to distract the Australian people from the unmitigated disaster of this government’s economic management. Scott Morrison and Malcolm Turnbull have ruled out everything else and are lurching around in the dark.

Labor has proposed a practical policy alternative to encourage Access to Justice for Small Businesses. Labor will foster private litigation under Part IV of the Competition and Consumer Act, encouraging court cases in the public interest. This is good for competition and good for small businesses.

Malcolm Turnbull promised economic leadership and a proper cabinet process. But his Deputy PM is dictating a dangerous economic policy that has divided the cabinet.

Recent comments about an effects test:

Richard Goyder of Wesfarmers, the largest employer in Australia:
"Every year we look at ... 20 new Bunnings warehouses, 30 new Coles stores, 20 new Kmart stores ... does that mean now every time we have a capital expenditure proposal come to us that we've got to look at the likely effect on competition?”

Graeme Samuel, former ACCC Chairman:
“Under the Harper amendment, businesses would curb their competitive behaviour because of the legal risk. This would have drowned the commercial activity of big business in a sea of uncertainty. Lawyers and economists would need to sit at the right hand of business CEOs to guide them on the legality of every significant transaction.”

WEDNESDAY, 16 MARCH 2016

ATTACHMENT – COALITION DIVISION ON AN EFFECTS TEST

Turnbull and Cabinet Ministers have been opposed to an effects test

For reasons the government has not explained, the debate was shelved indefinitely. Had it gone ahead, Mr Billson risked being rolled with the cabinet heavy hitters, many of them lawyers, opposed to his proposals. These included Attorney-General George Brandis, who has extensive legal experience in the area, Julie Bishop, Joe Hockey, Malcolm Turnbull, Mathias Cormann and Andrew Robb.

AFR/Coorey – 2 September 2015

And several of Billson’s cabinet colleagues – including the treasurer, Joe Hockey, the attorney general, George Brandis, the trade minister, Andrew Robb, the finance minister, Mathias Cormann, and the communications minister, Malcolm Turnbull – are understood to oppose it.

Guardian/Lenore Taylor – 1 September 2015

O’Dwyer was unable to respond to SmartCompany’s request for comment by deadline but Professor Bob Baxt, emeritus partner at O’Dwyer’s former law firm Herbert Smith Freehills and former chairman of the Trade Practices Commission, says he believes O’Dwyer does not support the effects test.   

“There is a clear body within the cabinet including Kelly O’Dwyer and Malcom Turnbull that will not be comfortable with this proposed change,” Baxt says.

Smart Company – 22 September 2015

Government Liberal backbencher Craig Kelly called the Harper review effects test reforms a Trojan Horse and said the act should be ripped up

That is why Peter Costello, the former Treasurer, agreed with the now Deputy Prime Minister Barnaby Joyce—then a senator —to introduce the Birdsville amendment to give us an effective regime against predatory pricing.

Yet, under the Harper review, that gets repealed and we get this faux effects test. I call on my colleagues: please, look at this proposal very carefully. It is not an effects test; its effect is to substantially lessen competition. It is not what you think it is it; it is a Trojan Horse.

Speech to HoR – 22 February 2016

The recent Harper review did get one thing right, and that is that section 46 needs reform. However, the so-called effects test debate is a phoney debate. It is worse—it is a bait and switch, and it is even a Trojan horse.

Speech to HoR – 26 November 2015

There is a debate currently going on this in this country about the best way to repair our broken competition laws and much of it has been around what has been promoted as an effects test. I would like to argue tonight that what is being called an 'effects test' is actually a misleading name.

In fact, what is being called an 'effects test' is actually no more than a Trojan Horse and something that is actually a classic bait-and-switch, but, if adopted, it would be contrary to the interests of those who believe in our free and competitive enterprise system.

Speech to HoR – 15 September 2015

What is being proposed is the 'effects test'. The effects test is being used as a Trojan horse to simply destroy the act. What is being proposed is tack onto the end of the act the removal of anti-prohibitions and to put there that it requires a substantial lessening of competition.

We may as well rip up the act. We may as well tell everyone in small business that there will be no protection for you, that predatory pricing will be lawful in this country, that geographic price discrimination will be lawful and that we want to see more anticompetitive price discrimination. That will be the outcome if this recommendation is accepted. We may as well simply rip the act up.

Speech to HoR – 25 September 2014