Australia Needs Infrastructure Reform: Competition Panel

Tuesday, September 30th, 2014
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Australia needs more competition based reform in the water and roads sectors and should recommit to a national water agreement and adopt broad based charging for road use, according to a new report.

Unveiling its draft report, the Competition Policy Review Panel appointed by the government in March made a raft of recommendations pertaining to mergers and acquisitions, anti-competitive agreements employment processes and misuse of market power.

In terms of infrastructure markets specifically, it noted measures such as privatisation, structural separation and pricing reform had delivered a more competitive environment with prices which were more consistent with the cost of service provision in a number of areas including electricity, gas, ports and freight rail.

“In contrast, (however,) in water and in roads there has been little progress introducing pricing that reflects the actual cost of use on the network, such as time and location charging,” it says. “Investment in those sectors is either funded directly from budgets or by users across the network, rather than from users according to the costs they impose on the network. Roads in particular have also been subject to investment bottlenecks.”

With regard to water, the panel says the industry in Australia is subject to a complex regulatory structure with different regulators in each state, and supports Infrastructure Australia’s call for nationally consistent rules on economic participation within the sector overseen by a national economic regulator.

In roads, it lists a number of problems, including new roads only being subject to tolls (whereas both new and existing roads need to be maintained), the current heavy vehicle charging regime (registration fees and fuel based charges) not being reflective of the actual cost of individual vehicles to the road network and taxes and charges on road users in general not being linked to the provision of roads.

It calls for direct charges on road use, with revenues raised going toward ongoing maintenance and construction costs – a call supported by groups such as the Business Council of Australia, which in its submission to the inquiry called for broad based charging of road users as part of a comprehensive program of tax reform and Commonwealth/State funding arrangements.

Commenting on the broader recommendations regarding the review as a whole, review chairman professor Ian Harper said the suggested changes sought to bring Australia’s competition policy ‘up-to-date.’

“Australia’s competition policy needs to be fit for purpose, and updated for the economic opportunities and challenges Australia will face in coming decades,” he said. “We face forces for change from increased globalisation, population ageing and new technologies, which are rapidly changing the way our markets operate.”

Consultation on the draft report will be open until November 17, with the panel expected to deliver its final report by March next year.

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