The Prime Minister’s concession to party rebels on energy policy is not merely a victory for climate denialists and the far right, but a significant shift toward interventionism in Australian policymaking — and arguably an overdue one. The policy package announced on Monday includes, in Malcolm Turnbull’s words:
Significant new powers so the ACCC can step in where there has been an abuse or misuse of market power. In the most egregious cases of market abuse, where the warnings from the ACCC are not adequately addressed, additional powers will be conferred on government to issue directions on operations, functional separation and even as a last resort, divestiture of parts of the big power companies… breaking up market concentration by ordering the separation of vertically integrated companies, yes, it is a power of last resort, but it’s necessary to have it available and we’ll make sure the government and the ACCC has the strongest tools with all of the appropriate safeguards.
Australian competition policy has traditionally centred around mergers and acquisitions, which the Australian Competition and Consumer Commission vets on the basis of whether they result in a substantial lessening of competition. Divestment is an available option for the ACCC, if a merger proceeds on a basis later found to be faulty (e.g. false information is given to the ACCC). And the ACCC may require divestment as a condition of a merger or acquisition, or the merging parties may voluntarily undertake divestment of some assets to win approval.
But Turnbull is talking about breaking up companies simply on the basis of their conduct, if they refuse to fall into line with the demands of the ACCC. And not before time: both the energy and finance sectors have demonstrated that the global trend to market concentration is bad for consumers and other businesses.
But this shift to interventionism isn’t the result of a considered program of policy assessment, but the consequence of political pressure. So was the last such foray into interventionism, when the government used the threat of a domestic gas reservation scheme to force gas exporters to curb exports. And the one before that, when the government abandoned its anti-protectionism policy that drove car manufacturing out of Australia and replaced it with a defence protectionism policy ten times bigger.
Only this time the pressure isn’t electoral, but from Turnbull’s own backbench. This includes, notionally, those from the Liberal Party — the party of freedom and capitalism and the unfettered right of corporations to exploit markets as effectively as possible.
But the interventionism doesn’t stop there. The government is also adopting the ACCC’s recommendation that it encourage the entry of new competitors into the generation market by underwriting the long-term contracts of big energy users. The government wouldn’t itself build new power generation assets (whether powered by coal, wind, solar, whatever) but would guarantee the long-term contracts of big power users (like a smelter) so that an entrant has incentive to build a new plant. And the government will also be imposing a “default market offer” on power companies to essentially dictate what they should be charging consumers. It’s a de facto price control.
If Labor had ever announced such a program of divestment powers, investment guarantees and price controls, the howls about socialism, sovereign risk and moral hazard would have been deafening.