Former competition regulator Allan Fels urged the government to toughen the laws to prevent damage to the economy from industries dominated by a few companies that have greater power to push up prices.
“There are signs the economy is stagnating due to a lack of competition,and the problem gets more serious every day that passes,” Fels said on Tuesday.
“The government needs to deliver on improved competition by the end of this year.”
Fels,who led the Australian Competition and Consumer Commission from 1995 to 2003,told a parliamentary inquiry in May that merger law needed to be stronger to deal with increased concentration over decades,raising the bar for takeovers.
He also called for the ACCC to gain a divestiture power akin to trust-busting US laws that can force companies to sell businesses when their market power grows too great. He said companies should have to notify the ACCC of any mergers before they were announced,adding that the law firms defending big companies had increased their resources far more than the regulator.
ACCC chair Gina Cass-Gottlieb earlier this year suggested changes to require companies to gain approval before a merger,picking up options advocated by her predecessor,Sims,but rejected by the Coalition when it was in power.
Sims said the government should toughen merger law to give the ACCC more authority as the decision-maker on deals,while also tackling the power of digital platforms such as Facebook and Google.
“Australia has one of the most concentrated economies in the world,” Sims said on Tuesday.
“There is one rail freight company,one dominant airline,two companies selling beer,two companies selling ice cream,and so forth.
“That level of concentration,according to all economic study,damages productivity. So if you want to promote productivity,you’ve got to improve competition.”
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Assistant Treasury Minister Andrew Leigh,a key figure in the new review,has warned in several speeches that market concentration is getting worse and is hurting smaller employers,with the new business startup rate lower in the 2010s than it was in the 2000s.
Leigh has also warned thatemployers could use non-compete clauses with their staff to slow wages growth and make it harder for people to get better jobs.
The government’s consideration of this week’s intergenerational report,the sixth long-range forecast to be released since the first document in 2002,has focused on how to repair the budget,target inflation,transform the energy sector to adapt to climate change,broaden the industrial base and attract investment.
It will be followed by an employment white paper that outlines potential incentives – including income tax rates – that could encourage people out of welfare and into work,a key issue for Social Services Minister Amanda Rishworth.
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The intergenerational report will show that the number of people aged 65 and over will double to more than 9 million over the four decades but spending on the age pension will decline because superannuation savings will help fund people in retirement.
Broader tax reform is off the agenda,withChalmers ruling out a suggestion from the Business Council of Australia for an increase in the GST. Several sources in the government,who spoke on condition they were not named,played down the idea of a cut to company tax when spending pressures were rising.
“We don’t have any plans or any intention to change the rate of the GST,” Chalmers said on Monday.
While industry groups want a review to explore ways to fund tax cuts for workers and companies with an increase in the GST,this is not part of the Labor agenda for the years ahead.
On foreign investment,Treasury is also working on reform options that would lower the barriers for friendly sources of capital that have been approved in the past,such as pension funds in Europe and the Americas.
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