Homelessness study report and competitive neutrality

Colin Cook

The critique of the Productivity Commission’s ‘Review Study Report on the Housing and Homelessness Agreement’ by Profs Rawson, Randolph et al has seemingly been written oblivious to the national policy of Economic Neutrality and the Productivity Commission’s role in its implementation.

The Commission’s website lists as one of its four Core Functions as it being, ‘the Australian Government’s competitive neutrality complaints mechanism’. For some years this was stated as ‘Policing Competitive Neutrality’! Maybe this smacked of ‘authoritativeness’. Similarly, the website formerly explained that:

“Competitive neutrality policies aim to promote efficient competition between public and private businesses. Specifically they seek to ensure that Government businesses do not enjoy competitive advantages over their private sector competitors simply by virtue of their public sector ownership.”

Currently, the website does not blatantly deny us, our governments or instrumentalities the enjoyment of such ‘competitive advantages’ as we may have. But it does give an extensive background and explanation of this topic.

Background

By way of Background, the PC refers to the Competition Principles Agreement (CPA) accepted by the Commonwealth, State and Territories at a COAG meeting of April 1995 to introduce nation-wide reforms to competition policy covering, inter alia, competitive neutrality between government and private business activities, a generalised regime for access to ‘essential’ infrastructure facilities and principles to apply to the reform of public sector monopolies.

What is competitive neutrality?

The PC answer to this question is too lengthy to reproduce here, and some quotes must suffice, though personal appraisal of the web site is strongly recommended:

‘Competitive neutrality policy … should be understood within the context of reforms which have been implemented progressively in Australia and elsewhere over the past decade (sic) or so; a consistent theme … has been an increased reliance on market-based mechanisms and competition to promote efficiency and competitiveness.’

‘In the public sector increased attention has been given to the core role of government … in an environment of resource constraint. This imperative has driven reforms ranging from privatisation, deregulation of public monopolies, competitive and contracting to various management reforms including devolution and accountability frameworks.’ (cries of ‘commercial in confidence’ stifle hopes of increased accountability!)

The absence of Competitive Neutrality requirements will ‘… reduce efficiency, the more so if government businesses are technically less efficient than their private sector competitors’ (and) … ‘resource allocation distortions occur because prices charged by significant government businesses need not fully reflect resource costs.’ (as if corporations generally do!)

Thus, It would seem that Competitive Neutrality has been the policy of the Federal Government and all States and Territories since 1995 regardless of political hue, with the Productivity Commission always ready to investigate complaints of infringements. These decades have seen increasing homelessness and inequality in Australia.

Explanation of report

Competitive Neutrality is an essential component of the neoliberal philosophy of privatisation, small government and ‘efficiency’. There is negligible consideration of quality of service or likely benefit to society of affordable, even below cost, government services. The critique by Profs Rawson and Randolph does speak of these ‘Broader Benefits of Social Housing’, reporting that “SGS Economics recently found the return on social housing investment is ‘comparable to, or better than’ major infrastructure projects.”

In respect of housing it is of particular interest that the PC website states, ‘The Commonwealth’s competitive neutrality arrangements will directly address … access to borrowings at concessional interest rates …’.

In short, a study of the PC website that examines its core issue of Economic Neutrality will uncover how this report by ‘Australia’s premier economic policy agency … rests on faulty assumptions and out-dated economic thinking’, and will explain ‘the commission’s embedded faith in market forces….’ as well as how it comes to recommend the replacement of ‘… income-based rents with market rents across social housing.’ But no study will enlighten the bizarre concept that decent housing will filter down to those in need like winter overcoats in charity shops!

En passant, the PC website has a heading proclaiming: “Providing independent research and advice to Government on economic, social and environmental issues affecting the welfare of Australians.” A review of the commissioners’ cvs shows a heavy cohort of economists 9 out of 12 via tertiary studies with US universities featuring strongly; an indigenous commissioner, one engineering and two law degrees representing other disciplines; with the collective cvs showing a wide range of corporate and international experience, and predominantly anglosphere in orientation. In view of the range of the issues encompassing society, environment and geography one might expect a different composition of the governing body.

Conclusion

Surely, after more than a quarter of a century during which huge changes have occurred, it is time to review the ‘Competitive Neutrality’ mindset that has been so inhibiting of public enterprise and needs; Australian dollars are clearly not a ‘constrained resource’ as revealed by the covid largesse but are indeed a vast resource that can be used for the betterment of our society. Market forces can and do ‘distort resource allocation’ – as exemplified by the money that has poured into new private dwellings compared with that used in eliminating homelessness.

This national policy of Competitive Neutrality should be scrapped after decades of failures, which range from the current chaos within the electricity system to the greatly inflated charges of the privatised Land Titles Offices and much else between these extremes. Time to throw off the heavy and stifling Competitive Neutrality blanket and acquire a more becoming, more comfortable doona – with natural filling and cover, 100% Australian of course!

Colin Cook is an ERA member living in South Australia.