National Competition Policu and its effects on rural Australia: A comparative analysis of three industries

In this paper we review some recent studies of the impact of National Competition Policy on rural Australia. National Competition Policy has tended to assume that both domestic and international deregulation of industry leads to a shift from a noncompetitive to a competitive industry structure. Due to the well known efficiency properties of competitive industry structures deregulation is justified as a means to generating greater efficiency in resource allocation. Whilst little can be said about the long-run evolution of market structures, in the short and medium term a competitive industry structure may not develop due to spatial, institutional and intertemporal imperfections. If these imperfections are ignored the costs of reform may be higher than necessary and the reform, as implemented, may not lead to the desired efficiency gains. We compare a series of studies of the Australian wheat, pig and sugar industries that have used a variety of methodologies to analyse the impact of deregulation on rural Australia. These studies are all consistent in that they suggest that the costs of deregulation could be reduced if increased emphasis were place on understanding industry structure and a staged approach to reform were followed.