Competitive neutrality requires that government business activities should not enjoy any net competitive advantages simply by virtue of public sector ownership. This ensures market competition drives efficient production by the lowest cost business.
Commonwealth, state and territory governments committed to implement competitive neutrality regimes in the 1995 Competition Principles Agreement, which was enhanced through the 2006 Competition Infrastructure Reform Agreement. For Commonwealth business activities, this commitment was implemented through the 1996 Competitive Neutrality Policy Statement and the 2004 Competitive Neutrality Guidelines for Managers (see Related Content section below).
The introduction of competitive neutrality policies was an important part of broader economic reforms that were introduced over several decades - for example, in international trade, domestic regulation and public sector management - and increased reliance on market-based mechanisms and competition to promote efficiency and economic growth. Over time, many business activities have been moved out of general government bureaucracies and into government-owned corporations where they have been subject to similar regulation, taxation and financing costs as their private sector competitors. In addition, competitive neutrality principles have generally ensured that, where government departments or agencies continue to conduct significant business activities, they do not gain a competitive advantage relative to actual or potential competitors.
The OECD recently concluded that Australia has one of the most complete competitive neutrality systems in the world (OECD 2012, p107). Nonetheless, the Competition Policy Review, led by Professor Ian Harper, made recommendations that all Australian governments should review their competitive neutrality policies and strengthen the accountability and transparency around the operation of the policies and complaint processes. In its response to the Competition Policy Review, the Commonwealth Government committed to review its competitive neutrality policy.
Treasury has established a Competitive Neutrality (CN) Review Secretariat to review the Commonwealth’s competitive neutrality policy, in consultation with the Department of Finance. The purpose of this Consultation Paper is to seek your feedback on the issues listed in the terms of reference below. Following consultations and submissions, the CN Review Secretariat will make recommendations to the Treasurer, including proposed revisions to the Commonwealth’s competitive neutrality policy, and associated implementation arrangements. Following Government consideration, the Treasurer will release the revised Competitive Neutrality Policy and a supporting statement that reflects submissions from stakeholders and the CN Review Secretariat’s report.