ERA success points to wider role: report

WESTERN Australia’s Economic Regulation Authority should be unshackled from its current constraints and allowed to become the state’s own version of the Productivity Commission to investigate and champion reform.

That is the view of a new joint report from the Institute of Public Affairs and Perth-based free market group Mannkal Economic Education Foundation which has assessed the micro-economic policy options for the new parliament after the March 2013 election.

The Project Western Australia report recommends the ERA, currently chaired by economist and former Chamber of Commerce and Industry WA chief Lyndon Rowe, be given powers to initiate its own inquiries and adequately resourced to act as a state-based micro-economic think tank.

The report gives credit to the ERA and WA Treasury Department for their past work on micro-economic reforms but suggests that a number of factors, including a lack of economic awareness among parliamentarians and reduction in emphasis in government on analysing micro-economic reform opportunities, means that progress has stalled.

The ERA was established in 2004 ahead of the break-up of WA’s electricity monopoly. Its remit was to act as economic regulator, overseeing monopoly service providers in the utilities sector, and to be an independent and transparent advisory body in matters referred to it by the state government.

The authors of Project Western Australia, Mannkal senior fellow Andrew Pickford and former federal parliamentarian John Hyde believe that the introduction of the ERA has been successful and it ought to be given a wider role in public policy.

“Now that the ERA has gained experience and established its credentials, it should have its brief expanded to embrace any regulation with potential economic consequences,” the report states.

“Widening the brief of the ERA will require additional public resources,” it continued.

“However, the sums will be trivial in comparison to the potential benefit of reliable knowledge of the cost of restrictions on economic activity.”

The report highlights the area of greatest concern to business development in WA, notably environmental restrictions which have added a significant burden on any project, be it in resources or property. Given that housing affordability is another issue raised by this report it should come as no surprise that Project Western Australia has focused on regulations that inhibit land supply and push up the cost of property development.

“The need for this information is most obvious in the areas of environmental and land use planning where it is often contended that restrictions inhibit economic development,” the report states.

“We do not argue that any environmental or land use restriction is without benefits, but only that the benefits foregone should be known to allow for rational evaluation.”

After the launch of the report Mr Pickford told WA Business News that micro-economic reform was the next stage following wider economic changes that took place in the 1980s and 1990s.

“The low hanging fruit has mainly been picked,” Mr Pickford said. “Now it is the secondary work and you need brain power.

“You can’t just rush in and say ‘reform is great’; you have to have the capacity to undertake that.”

Mr Pickford said the ERA could “become its own think tank, a mini Productivity Commission” reflecting the federal agency created in 1998 to help governments make better policies in the long term interest of the Australian community.

Project Western Australia outlines a number of micro-economic reforms from the taxi industry to industrial relations which need to be properly investigated and the benefits more widely communicated.

The report believes that those driving policy and deciding on its legislative outcomes lack the tools to tackle these seemingly less crucial issues without the urgency created by crisis.

“…one of the reasons for the lack of appetite for continuing reform is that our parliamentarians and governments do not have the adequate economic tools or general awareness of the need and opportunity to embark on public policy changes or of the cost of not making the changes,” the report said.

“It is also essential that information is available to the public as well as to elected and appointed officials who, in the absence of crisis, have little incentive to differ from the status quo.”

• See Think tank findings stir debate