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Grain of politics in regulation

By Mark Christensen - posted Monday, 14 November 2005


Despite barking at others for the last decade, the Federal Government has conveniently overlooked two important competitive reforms. And the hypocrisy has come back to haunt it on both.

At the same time as it was demanding states bust up their electricity industries and abandon infrastructure monopolies, Canberra fiercely protected its own. The refusal to split Telstra’s network from its competitive retail businesses, means Australia will soon be left with a privatised dominant telco that will be forever distracted by costly and ineffective regulation.

The other missed opportunity was the former Australian Wheat Board.

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The response of the AWB to the Iraqi Grains Board swindle is symptomatic of an organisation willing to do whatever it takes to protect its own interests at the expense of everyone around it.

If the AWB didn’t know what was going on after spending 20 years’ attempting to understand the local market, then they are guilty of significant commercial ineptitude. If they did know, they owe Australia an apology, given its government-sanctioned monopoly carries an implicit sovereign endorsement.

Either way, the inward and conceited culture of the AWB has been clearly abetted by the Federal Government.

The AWB is a listed company with a legislated monopoly over the sale of export wheat. It sells Australian produce across a “single desk” in the hope that it can increase the price it receives for local growers.

While just about every other organisation in this country has had to face up to micro-economic reform, the AWB, thanks largely to the agrarian socialists in the National Party, has been able to slip the competition net. The routine political influence it wields is astounding.

A 2000 draft report by a federal review into its exclusive powers proposed a trial de-regulation period for the AWB. This view did not make its way into the final recommendations.

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The 2000 review did conclude that there would be benefits from allowing competition. Restrictions used to mandate a single desk were found to inhibit innovation and the pursuit of new overseas markets. Regardless, the review still saw a need to hedge its bets.

Despite the arguments and evidence, it said it would be premature to remove export controls. Competition should be delayed until 2004, at which time there would be “one final opportunity” for a compelling case to be compiled in support of AWB’s single desk.

This last chance to be convinced has yet to arrive. The Federal Government went soft, establishing a 2004 Wheat Marketing Review that explicitly excluded any analysis of whether AWB’s monopoly should be retained. Intriguingly, the review did comment on the single desk, though only to say ongoing reviews of the arrangements were costly, created uncertainty and undermined the strategic management of what the AWB was all about.

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First published in The Courier-Mail on November 3, 2005.



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About the Author

Mark is a social and political commentator, with a background in economics. He also has an abiding interest in philosophy and theology, and is trying to write a book on the nature of reality. He blogs here.

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Creative Commons LicenseThis work is licensed under a Creative Commons License.

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