Labor, Government Business Enterprises and Competition Policy (Essay‪)‬

In its 1996 Report 'on aspects of the management and financial activities of the Commonwealth Government', the National Commission of Audit (NCA), didn't mince words about government business enterprises (GBEs--also known as state-owned enterprises, government trading enterprises and government-owned enterprises)--certainly not in relation to those that could 'be operated successfully by the private sector' or those for whose existence there was 'no public interest reason'. Apart from 'market failure' or the need to ensure 'social equity', democratically elected governments should not own businesses. The NCA's concerns were clear: 'Commercial activities distract a government's attention away [sic] from its core activities'; 'There are difficulties in putting a government-owned organisation in a position of competitive neutrality with the private sector'; and 'Conflicts of interest can occur where a government owns a corporation and regulates its activities as well as those of market competitors'. The NCA conceded that, once upon a time, there had been good reasons for governments becoming involved in commercial operations: 'the private sector was seen as incapable of delivering the required products or services; the community considered it appropriate that government should own a firm that operated as a natural monopoly; or the government wanted to fulfill a community service obligation'. Now, however, it was 'not clear' that there continued 'to be valid reasons for government ownership of businesses. Private markets had matured and could provide many services provided by GBEs, natural monopolies could often be managed better through regulation, and community service obligations could be met through a tendering process and explicit budget funding rather than through hidden cross subsidies'. Moreover, '[c]ommunity expectations about what governments can do and how they should operate' had 'changed since the 1970s and 1980s'. In the absence of 'clear' reasons for holding on, the NCA was keen to see governments divest. It noted the sale of Qantas and the Commonwealth Bank, under Labor; and the commitment of the new Government to the sale of one-third of Telstra. (1) But from the Commission's perspective this hardly went far enough. At a minimum the Commonwealth 'should review the need for continuing government ownership of all GBEs'. (2) The job of the government, it declared, was not to own businesses; its business lay in 'specifying the rules and the results required' (3)--a gesture, perhaps, to competition as both process (rules) and outcome (the avoidance of monopoly).