Coalition Is Back But The Fog Hasn't Cleared
Sydney Morning Herald
Monday November 12, 2001
The Government has some trinkets to hand out, but what about the big picture?
The return of the Howard Government is a mild short-term plus for business and the markets.
The poll itself ended five weeks of uncertainty, a hung Parliament was avoided, and the Coalition platform is sprinkled with pro- business policies, including the sale of the rest of Telstra and the deregulation of media ownership.
One Nation's vote also slumped in the election, sending a positive signal to offshore markets. And this morning there is some speculation that the Reserve Bank board will announce an interest rate reduction the theory being that a cut may have been sanctioned at its meeting earlier this month and held back because the election campaign was running.
The full implications of John Howard's victory will take longer to emerge. The big question is: after committing almost $21 billion over the four years ahead of the election to shore up its support, will the Government have the capacity or the energy to continue economic reform?
The Government has Telstra sale proceeds in its Budget numbers for 2003-04, and just before the election was called communications minister Richard Alston announced that the Government wanted to review media ownership laws.
But it will still not control the Senate, where a Labor/minor party coalition opposes a Telstra sale and any major relaxation of the media ownership rules.
The Coalition also promised during the campaign to review the competition provisions of the Trade Practices Act, but that does not mean big business's push for easier merger rules will succeed.
Business Council of Australia president John Schubert put the issue on the election agenda one week into the campaign, when he called for reform of the 31-year-old Act, which blocks mergers which result in a substantial lessening of competition.
Howard announced soon after that a Coalition government would set up a review of the competition rules, hearing arguments from different parts of the business community.
The BCA represents Australia's largest companies. Some have emerged victorious from decades of industry rationalisation and are now blocked from using takeovers to grow local market share.
They would like to see a return of the pre-1990 merger test, which only prevented mergers which gave the combined business domination of its market. Their key argument is that competition is now global, and that the degree of ``ownership" of the domestic market matters less than the fact that companies need to be big, low-cost producers and capital raisers to strut the global stage.
But the concentration of ownership in many local industries is already relatively high, and small business groups are leery about changes that make it even easier for the biggest companies to buy competitors. So too is the competition law enforcer, Australian Competition and Consumer Commission chairman Allan Fels.
Rob Bastion, head of the Council of Small Business Organisations of Australia, responded to Howard's announcement of a review by saying his council hoped it would lead to curbs on big business, not more freedom. Further attention needed to be paid to side effects of rationalisation, Bastion said, adding that the announcement stressed the need to help big business compete globally, which ``usually means allowing even greater concentrations of power locally."
Fels says the ACCC just administers the law it is given. But he says it has never blocked a merger where there is measurable import competition a merger which, in other words, fits the BCA's global markets definition.
The election result also means Ansett's fate could be quickly decided, perhaps on less generous terms than the Solomon Lew-Lindsay Fox consortium and Ansett workers hope.
Tomorrow Lew-Fox representatives are expected to go to Canberra to press for financial and regulatory support for an offer which revives the airline as a full-service carrier.
Ahead of the election, the Government was maintaining that $195 million in funding it advanced to cover worker entitlements should be repaid via an Ansett asset sale, reducing the amount available for repaying creditors, including ex-employees.
The renewed Howard Government will not easily change its stance, but that does not automatically sink the Lew-Fox deal.
The Melbourne magnates have asked for (and will get) payroll tax waivers and other incentives from the Victorian Government. They also stand a good chance of receiving federal tax incentives.
They also want the airline industry regulatory system beefed up to give the ACCC power to issue ``cease and desist" orders against anti-competitive conduct powers that would apply in principle to all industry participants, but effectively be aimed at the now-dominant Qantas. In the telecom industry the same powers are intended to muzzle Telstra.
Lew and Fox appear to have an ally in their push for a tougher regulatory regime in Virgin Blue. It does not believe the Government should give Ansett the $195 million, but it has also been lobbying for ``cease and desist" powers in the industry.
If the Government continues to insist that the $195 million is only a loan and Lew and Fox press on, the ball will be in the ACTU's court. It represents Ansett workers as creditors owed almost $800 million in entitlements, and could block any rescue bid. Whether it would do so when the alternative could be a full liquidation of Ansett is another thing.
mmaiden@theage.com.au
© 2001 Sydney Morning Herald
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