A summary of this syllabus area. Organised to align with syllabus dot points, in a clear format. Includes statistics and examples, ideal for use in essays and short answer questions.
Involves the simplification or removal of rules that constrain the operation of market forces and it aims
to improve the efficiency of industries.
● Creates more competition within an industry
● Aus tightly regulated post-WWII (attempts to protect industries from the Great Depression).
Deregulation began in early 1980s [Financial sector and Int trade])
→ helped drive structural change in many industries
● Deregulation continued to increase after dollar was floated
Examples
● Labour Market: shift from centralised wage fixing to enterprise bargaining that began in late
1980s
● National Competition Policy
Evaluation
● Widely considered successful.
● Aus GDP/capita had fallen from 5th highest in 1950 (of the group of pre-1994 OECD countries
for which comparable data is available), to 9th in 1973 and 15th in 1990. However, by 2001,
following several decades of sustained deregulation, Australia’s ranking had recovered to 7th.
Parham (2002) notes that it is widely accepted that the microeconomic reform aspects of
deregulation played a major role in this turnaround
● 2005: Productivity Commission concluded that a subset of the NCP reforms had increased
Australia’s GDP by 2.5% even before the ‘dynamic’ efficiency gains of more competitive
markets are taken into account
Continuing Regulation:
Effective deregulation = balance between competing policy goals. But excessive deregulation = market
failure and instability.
Effective regulation = imposes additional costs, constrain economic growth and undermine
competitiveness.
Most Australian industries still operate in a significantly regulated framework, eg.
● Environmental regulations play a significant role in agricultural/mining industries.
● Safety regimes - construction and transport industries
● Pricing + investment decisions overseen by regulators in industries such as electricity, gas,
water, postal services, telecommunications (as they are dominated by large players that would
otherwise have the ability to charge higher prices due to lack of competition)
Professional services industries (eg. law/accounting) exist in part to help businesses
comply with regulation → new business (eg. Uber/AirBnB) = new transport, planning,
privacy and tax laws.
∴ Aus economy deregulated in a sense, but in another sense new regulation has emerged.
, Reforms to Public Trading Enterprise
Microeconomic policy has promoted efficiency in PTE’s (aka. Government business enterprises).
Corporatisation of PTE’s
● Aims to encourage PTE’s to offer independently from gov
● Involves eliminating political + bureaucratic supervision and making PTE managers accountable
for enterprise performance
● Corporatised PTE’s attempt to earn a rate of return on assets comparable to the private sector,
and often operate in competitive markets (but some operate as regulated monopolies).
● Thus, they must comply with neutrality laws which ensure they do not receive artificial
advantage over private businesses because they are publicly owned
● Eg. Australia Post, Energy Australia, Sydney Water Corporation
Privatisation of PTE’s
● Furthers corporatisation by selling off PTEs = become private enterprises
● Aus extensive privatisation in recent decades, with value of privatised businesses among
highest in the world. 2nd (by value) to the UK
● Privatisation aims to raise one-off revenues, increase competition, encourage more rational
management and pricing behaviour, and forcing businesses to become more efficient
● In the 1990s, Aus gov privatised a significant portion of the public sector. Proceeds estimated to
have exceeded $61b from 1990-97
● 3 main sectors: financial services, electricity and gas, and transport and communication
● Most recent significant by Federal gov was health insurer Medibank Private, gov owned for 38
years, sold for $5.6b in 2014
● Recent years, State gov privatised assets to free up capital for other purposes, eg. transport
projects.
→ factor in NSW 2015 plan to privatise $20b electricity business (proceeds to
numerous transport infrastructure projects)
● Departure from trend of privatisation: 2009 Federal gov established new PTE to build and
operate an optical fibre telecommunications system, the NBN. Its final cost in 2018 was $51b,
when completed will be NBN company will be one of the largest in country
● Impact of privatisation on debt:
Among States, net debt has fallen from peak $76b (June 1993) to $47b (June 1997). Over same
period, domestic debt securities in issue from State gov’s have declined by ⅓ to $38b
The stock of Cmnth Gov securities steadied over 1996 at around $110b, partly due to
receipts from privatisations and partly due to the projected run of underlying budget
surpluses.
● Privatisation creates a market for shares in the privatised venture. If management of the venture
is under-performing, the value of its shares will reflect that under-performance. That creates the
opportunity for alternative owners to purchase shares in the market, assume control and run the
organisation more efficiently, thereby improving the market valuation and their own wealth.
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