Competitive Neutrality Policy
The Australian Newsagents' Federation strongly advocates the principle of competitive neutrality with an effective set of rules capable of identifying and obviating such practices as part of the national competition policy regime.
The principle of competitive neutrality requires that government business activities should not enjoy net competitive advantages over their private sector competitors simply by virtue of public sector ownership.
Specifically, competitive neutrality requires that governments should not use their legislative or fiscal powers to advantage their own businesses over the private sector.
If governments do advantage their businesses in this way, it will distort the competitive process and reduce efficiency, the more so if the government businesses are technically less efficient than their private sector competitors.
Examples where a lack of competitive neutrality is particularly inequitable occur in instances where an entity, by virtue of its government owned status, receives:
- Favourable taxation treatment,
- Borrowing cost advantages,
- Favourable treatment or relief from regulatory compliance, and
- Advantage in respect of below market required rates of return or dividend expectations.
Where competitive neutrality arrangements are not in place, resource allocation distortions occur because prices charged by significant government businesses need not fully reflect resource costs.
Consequently, this can distort decisions on production and consumption, for example where to purchase goods and services, and the mix of goods and services provided by the government sector. It can also distort investment and other decisions of private sector competitors.
Competitive neutrality does not imply that government businesses cannot be successful in competition with private businesses. Government businesses can achieve success as a result of their own merits and intrinsic strengths, but not as a consequence of unfair advantages flowing from government ownership.
The Federation, where appropriate, supports the call for the transparency and investigation of instances where potential breaches of the Government's competitive neutrality policy may impact on the newsagent industry.