1. Incentive policies As emphasised, productivity improvements generally necessitate changes within organisations and across industries. But change is never easy: it requires effort; it can be disruptive, and is often resisted. There need to be good reasons for going to the trouble. Competition provides such a reason, at least for firms operating in the private sector. In competitive markets, enterprises with relatively low productivity will generally be less profitable than others and will eventually face market sanctions. As Samuel Johnson famously put it in another context, the prospect of a hanging the mind’. Competition accordingly drives both innovation and ‘concentrates the dual determinants of a overall productivity ‘creative destruction’, country’s performance. Actions that foster competitive markets including for corporate control must — — therefore be fundamental to a policy agenda to enhance productivity. government’s Exposure to international competition is perhaps the most important area of all, as it obliges local enterprises to strive for best practice. world’s As noted, Australia has undergone successive rounds of reform directed at opening up industries to both domestic and foreign competition. These culminated in the National Competition Policy, which remains embedded in policy-making frameworks today. The benefits to the community have been substantial (PC 2005a). It is therefore of concern that progress has stalled or even reversed in some policy areas. The do Commission recommendations is still a ‘to list’ among fairly long one. Most industries now receive Abolish remaining tariffs (PC 2000, 2008a, 2010a). relatively low levels of tariff assistance, the result of incremental reforms over the past 25 or so years. But remaining tariffs still impose unnecessary costs on the community. They detract from productivity primarily by helping Australia’s to prop up an least productive firms. They also confuse the signals for industry’s all industries as to whether their futures lie in the pursuit of productivity or preferment. Selling goods abroad at Limit provisions for anti-‘dumping’ (PC 2009b). action prices below those at home is normal business practice in various circumstances and one adopted by many Australian firms. Imposing (often sizeable) penalty duties on such imports protects less competitive firms at the expense not only of consumers, but also other local user industries (as the auto assemblers are finding right now in relation to their steel inputs). The rules allowing such
1. Incentive policies As emphasised, productivity improvements generally necessitate changes within organisations and across industries. But change is never easy: it requires effort; it can be disruptive, and is often resisted. There need to be good reasons for going to the trouble. Competition provides such a reason, at least for firms operating in the private sector. In competitive markets, enterprises with relatively low productivity will generally be less profitable than others and will eventually face market sanctions. As Samuel Johnson famously put it in another context, the prospect of a hanging ‘concentrates the mind’. Competition accordingly drives both innovation and ‘creative destruction’, the dual determinants of a country’s overall productivity performance. Actions that foster competitive markets — including for corporate control — must therefore be fundamental to a government’s policy agenda to enhance productivity. Exposure to international competition is perhaps the most important area of all, as it obliges local enterprises to strive for world’s best practice. As noted, Australia has undergone successive rounds of reform directed at opening up industries to both domestic and foreign competition. These culminated in the National Competition Policy, which remains embedded in policy-making frameworks today. The benefits to the community have been substantial (PC 2005a). It is therefore of concern that progress has stalled or even reversed in some policy areas. The ‘to do list’ among Commission recommendations is still a fairly long one. Abolish remaining tariffs (PC 2000, 2008a, 2010a). Most industries now receive relatively low levels of tariff assistance, the result of incremental reforms over the past 25 or so years. But remaining tariffs still impose unnecessary costs on the community. They detract from Australia’s productivity primarily by helping to prop up an industry’s least productive firms. They also confuse the signals for all industries as to whether their futures lie in the pursuit of productivity or preferment. Limit provisions for anti-‘dumping’ action (PC 2009b). Selling goods abroad at prices below those at home is normal business practice in various circumstances and one adopted by many Australian firms. Imposing (often sizeable) penalty duties on such imports protects less competitive firms at the expense not only of consumers, but also other local user industries (as the auto assemblers are finding right now in relation to their steel inputs). The rules allowing such
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