By Shane Wright
Every Australian household could be $5000 better off under a federal plan to offer states a share of $900 million to rip up red tape that is propping up high prices in areas from car repairs to pre-fabricated homes.
As a survey of shoppers shows they fear the impact of Donald Trump’s US election win on their finances, Treasurer Jim Chalmers will use a major speech on Wednesday to reveal the government will resurrect a Keating- and Howard-era policy to reward states for undertaking reforms that boost competition and reduce costs to businesses and consumers.
Treasurer Jim Chalmers will reveal plans to offer state governments extra cash so they undertake reforms that will improve the economy.Credit: Alex Ellinghausen
The government is planning to create a $900 million National Competition Policy fund, from which the states would be compensated for changes that might cost them but would deliver a boost to federal tax collections.
Chalmers will tell the Australian Business Economists organisation that the fund will help drive a new wave of productivity that would deliver financial benefits, and lower prices, to all households and businesses.
“More competition means a more productive and more dynamic economy, with better jobs, more choices and growth, and fairer prices,” he will say.
“It’s all about rewarding states with more revenue, where they deliver meaningful and measurable economic reforms.”
A Productivity Commission report into a wide-ranging national competition policy agenda suggests it could boost GDP by $45 billion a year and reduce prices across the economy by almost 1.5 percentage points.
It would be worth about $5000 a household, per year.
That would be about the same benefit that flowed from the original national competition policy reforms overseen by the Keating and Howard governments between 1995 and 2005. These included the break-up of state agricultural marketing boards, opening up competition in the optometry and pharmacy sectors and ending conveyancing monopolies, which slashed fees by up to 50 per cent.
States will be offered a “menu” of possible reforms, but the housing and development sector is expected to be central to the new arrangements.
Chalmers will say that streamlining commercial planning and zoning, to enable the more timely construction of residential and non-residential properties, is likely to be one area to attract federal money.
Barriers to modern construction methods, such as those that hold back the use of modular or prefabricated housing in many councils across the country, are also in the government’s sights.
It also plans to fast-track legislation to streamline product safety standards in a move it says will save businesses up to $5 billion over the next decade. Businesses will be able to import products that meet Australian safety standards without putting them through separate domestic testing.
It will also introduce a general “right-to-repair” rule to address growing concerns among consumers that they are increasingly being forced to get products repaired by approved outlets, which are often more expensive than non-approved businesses.
A Productivity Commission report in late 2021 found there were “significant and unnecessary barriers” to consumers finding cheap repairs or spare parts. There is particular concern about the restrictions imposed on unaligned vehicle repairers, which usually offer cheaper services than major-brand mechanics and workshops.
Reforms to housing construction are likely to get funding through a new approach to encouraging economic reform.Credit: Bloomberg
Chalmers will make the speech as economists try to determine the potential economic fallout from the second Trump presidency. Trump went to the US election promising tariffs of up to 20 per cent on goods from all countries, and even more from China; the mass deportation of up to 5 per cent of the American workforce; and interference in domestic interest rates.
The Westpac-Melbourne Institute measure of consumer sentiment, released on Tuesday, showed confidence among Australian shoppers jumped 5.3 per cent in November to its highest point since the 2022 federal election.
The bank’s head of Australian macro-forecasting, Matthew Hassan, said a slowdown in inflation, better wage growth and the likely end to further interest rate increases had buoyed confidence.
But the survey, which was taken through last week, showed some big swings due to the US election results.
Among people surveyed at the start of the week, the index was at 99.7. There is an equal number of optimists and pessimists when the survey is at 100.
Following the Reserve Bank board’s decision to hold interest rates last Tuesday afternoon, there was little change in the survey’s result.
But after the US election results became apparent on Wednesday afternoon, confidence among Australian consumers nosedived. Among those questioned after Trump’s election victory, confidence was at 91.1.
“Needless to say, these swings make the November result trickier to assess. Whether the strong start or weaker finish to the week is a better guide depends on how lasting the post-US election drop is expected to be,” Hassan said.
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