National Competition Policy analysis

National Competition Policy: modelling proposed reforms
Study report

Released 29 / 11 / 2024

The report supports the National Competition Policy process by estimating the likely economy-wide and fiscal effects of a broad agenda of policy reforms.

This report was sent to Government on 1 November 2024 and publicly released on 29 November 2024.

PC National Computable general equilibrium (CGE) model (XLSX 608 KB)

Key points

Australia has greatly benefited from past competition policy reforms – but, in recent years, reform efforts have stalled. A new round of National Competition Policy Reforms could boost GDP by an estimated $26–45 billion in 2023 24 dollars (or by 1.0–1.7% of GDP).
- We assessed the economic impact of 26 proposed reforms identified by the Australian, state and territory governments through the Council for Federal Financial Relations. The reforms spanned five themes: dynamic business environment; net zero; labour mobility; human services; and data and digital.
- This is an estimate of potential benefits. For many reforms, key details about the reforms and implementation do not currently exist. In these cases, we assumed the intended outcomes are realised to their fullest extent.
Overall, the proposed reforms will be good for Australians, with the boost to GDP supplemented by other benefits such as improvements in consumer access and welfare, and contributions towards Australia’s emission reductions.
- The impacts of many of the proposed reforms are likely to be far reaching, but not all benefits can be quantified in dollar terms.
- For many of the human services reforms, the most important benefits lie not with GDP, but with improving quality of care, consumer access and welfare. For many of the net zero reforms, the main benefits will be their contribution to Australia meeting its emission targets.
In the long run, the proposed reforms will ease cost of living pressures, reducing prices by an estimated 0.7–1.5%, but the effect of individual reforms is mixed. That said, short run price effects could differ, so some reforms may ease cost of living pressures in the short run, even if they do not in the long run.
The proposed reforms will increase net government revenues in the long run. For the Australian Government, net revenues will be an estimated $5.7–9.2 billion higher. For state and territory governments as a whole, net revenues will be an estimated $2.4 billion higher overall.
- A key driver of this effect is that the boost to GDP leads to higher tax revenues for governments.
- This represents the long run effects on government budgets of the reforms being in place. It does not account for upfront or transition costs associated with rolling out the reforms – such estimates would require significantly more detail about scope and implementation than was available to us.
For many reforms, getting the scope and implementation right will be key. Particular caution should be taken for the reforms about consumer switching, data sharing, information provision in human services and efficient user charging.