Sims warns on greedy privatisation and backs transport reform

Roads, ports and shopping dominate regulatory conference speech by ACCC boss

Sims warns on greedy privatisation and backs transport reform
Rod Sims has freight transport at front of mind


Transport and logistics issues figured in four of five reform points Australian Competition & Consumer Commission chairman Rod Sims raised in the opening address to the ACCC / AER Regulatory Conference in Brisbane.

These were privatisation, roads, congestion pricing, shipping and water, with privatisation including issues related to ports and rail.

And despite Sims being "personally a strong advocate of privatisation" following involvement in government-owned infrastructure businesses including rail, he is highly critical of poor political approaches to the task.

"The reason to privatise assets is to promote economic efficiency, as governments seek to sell assets to the ‘right owner’," he says.

"Privatisation can cause problems when the principal objective is to maximise sale proceeds through, say, poor industry structures or inadequate regulation; the immediate financial benefit comes at a cost of an effective ‘tax’ on future generations."

On roads, he highlights the lack of microeconomic reform that has occurred in other industries since the 1990s and nominated three main "disconnects" of charging mechanisms and structural arrangements fail to promote efficient decisions by road users and funding bodies.

Raised previously, these are:

  • the prices faced by road users do not reflect the economic costs of using roads, sometimes by a very long way
  • there is no link between the prices charged to road users and the revenues received by road providers
  • decisions about funding for investment in roads are often made via political processes rather than by an independent assessment of the relative costs and benefits of a proposed investment.

Structural reform would lead to "considerable productivity benefits".

On congestion, Sims uses a holiday simile to emphasise its wider use.

"All Australians understand why it costs more to rent a beach house in January than July," he says.

"We just don’t call it congestion pricing."

And he was in no doubt as to its efficacy, nominating container trucking as one example.

"The most efficient way to ration or allocate limited capacity, and for businesses and governments to receive the right signals about the need for new infrastructure, is for users to face prices that vary according to the supply and demand conditions at their time of use," Sims says.

"There are opportunities to enhance the productivity of certain key infrastructure assets such as roads, electricity, ports and airports by greater use of congestion pricing.

"This includes peak period pricing for trucks accessing container terminals, allocation of airline take-off and landing slots, and encouraging electricity users to reduce consumption during critical peak demand periods."

At a time when cartel immunity for shipping lines is under sustained attack internationally, Sims reiterated the ACCC’s contention that Part X of Competition and Consumer Act 2010 (CCA), which allows such protection in Australia should lose its automatic availability.

"Instead, cooperative arrangements between shipping competitors should be subject to the same threshold as all other industries; which is do they deliver net public benefits to the Australian community?" Sims says.

The ACCC has conducted six Part X-related investigations between 1992 and 2006 but none since.

Part X, which also has a domestic shipping component, has a dual role that seeks to account for the country’s position off the major trade routes.

The Act states that it is aimed at giving exporters ‘continued access to outwards liner cargo shipping services of adequate frequency and reliability at freight rates that are internationally competitive", while also promoting "conditions in the international liner cargo shipping industry that encourage stable access to export markets for exporters in all States and Territories".

There is also a regulatory tension in coastal shipping policy, which seeks to foster Australian-flag and maritime-skill interests while allowing the mode to be affordable.

Seeing it as unresolvable, the present Federal Government is eyeing reform and Sims supports this.

"In the domestic shipping sector, there are a number of legislative restrictions on competition, including in relation to temporary licences and labour conditions, that result in higher freight costs for Australian businesses," he says.

"These regulations should be reviewed and abolished where appropriate."


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