The Cambridge Handbook of the Social Sciences in Australia

By Ian McAllister; Steve Dowrick et al. | Go to book overview
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overstated claims of benefits from reform have had adverse consequences, drawing attention away from those who lose through the reform process and away from potentially more important issues like unemployment.

Determining the gains or losses from a diverse set of policy reforms is difficult.The Productivity Commission (1998) provides a set of relevant papers but these reach few definite conclusions. Lawrence, Diewert and Fox (2001) develop a method to break down the benefits of reform between different groups in society owners, workers and customers. They apply this method to Telstra (Telecom Australia and OTC until 1992) between 1984 and 1994. However, the method has not been used to examine the distribution of gains from more recent reforms.

As Gregory (Productivity Commission 1998:428–9) notes, 'Perhaps the most interesting unresolved question is why micro reform has not led to unambiguously better macro outcomes in Australia and New Zealand'.While there is potentially a wide range of answers to this question, two stand out. First, our understanding of economic growth, its measurement and its causes is relatively poor. Second, the diverse reforms have included beneficial and misguided policies. As Quiggin (1996:221) notes:

there are some elements of the microeconomic program, such as waterfront reform and egg industry deregulation, for which nearly all economists would agree that the net benefits have been positive. In other instances, for example the laying of duplicate cable telephone systems by Telstra and Optus, nearly all commentators agree that there has been a social loss.

In brief, the debate over the gains from the Hilmer reforms reflects a lack of input from economic research into parts of the reform process, and the need for further research into how competition policy interacts with the wider economy.


I would like to thank Anthony Niblett for his excellent research assistance, and John Quiggin and Steve Dowrick for comments on an earlier draft.

For a background to the act, see Clark and Corones (1999).
See also Industry Commission (1991a, 1992) and Quiggin (1996:199–200). Dowrick (1993) argued that the Industry Commission case was overstated.
A natural monopoly refers to a production technology where it is more efficient to provide all output from only one firm rather than have multiple competing firms supplying the same output. This technology is most common in utility industries where there are large fixed costs of production (for example, the cost of a dam in water, the cost of the track network in rail) and relatively low marginal costs (for example, the cost of an extra telephone call in uncongested periods is close to zero).
King (1997) provides a short economic survey of the Hilmer process and the key reforms.


Abadee, A. 1997.The essential facilities doctrine and the national access regime: A residual role for section 46 of the Trade Practices Act? Trade Practices Law Journal 5:27–47.


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