Regulation Major Publications

Smoking has been on a declining trend for at least 60 years. This is attributable to many factors, including health concerns and the progressively higher taxes imposed on tobacco. ​ The downward trend has flattened over recent years as the remaining smokers have a greater degree of addiction. People who continue to smoke are especially concentrated among those with lower income and facing the greatest social disadvantage. People with mental illnesses appear to find comfort in the use of nicotine

There are two means by which regulation is effected. One comprises laws that simply require things be done and the other is the expenditures of governments – the taxes and subsidies that shift activities from where they would otherwise be. Subsidies are no less regulations than compulsive measures, since they rely on government for the funds they employ.

We have recently emerged from an era, which peaked some three decades ago, during which socialist thinking dominated government decision taking. This perspective led many to believe that “experts” provide more accurate determinations of demand (and more appropriate supply responses) than the various individual decision makers in the community

There is an understandable tendency for people to dismiss 'regulation' as a boring topic for economists. But the effects, for good and ill, of regulation pervade everyday life. Regulation profoundly affects what you can and cannot buy, how much you pay, the price of your house, the quality of your child's education and whether they can get a job. It is a basic, quality of life, question.

The electricity and gas markets are fundamentally commodity markets. But they differ from other commodity markets in two major respects: • First the producers have massive mutual interest in the delivery system being maintained in a safe and reliable manner. It is not usually practicable for firms or individuals outside of remote areas to opt out of the network in either gas or electricity. And even where it is possible the parties undertake strenuous efforts to avoid it. Gas in Australia is something of an exception since until recently there were bilateral monopolies operating in both Victoria and NSW with only one producer and one retail/distributor. • Secondly, the lack of storage of electricity in particular means the suppliers and consumers need to cooperate far more closely than this is required in other commodity markets.

Ministers at the Council of Australian Governments meeting on 7 December 2012 sought a paper which would examine the regulations under which the Consumer Advocacy Panel “allocates grants to ensure it continues to operate in the interests of energy consumers”. The consultants commissioned to address the issue have published an interim report. This expands the scope and size of the proposal as initially envisaged. As announced by the Prime Minister, the new body was have staffing of 9.5 people. The review panel has upped this to 15 Full Time Equivalents with a budget of $5-7 million a year to cover:  Administration  Consultancy fees and “capacity building”, seed funding to state based consumerist groups matched dollar for dollar by state governments; and  Project funding for existing advocacy organisations. In this respect the NAB would build upon and absorb the extant Consumer Advocacy Panel, which already funds NGOs for analysis and advice on the energy market. The body will supplement work of the already established Consumer Challenge Panel, providing an additional source of, “commentary and insights from a consumer impact and interest perspective”.

Many areas of government intervention in business decisions have been much reduced over recent years. ‘Social’ regulation covering standards, pollution and the like has tended to mount; but the ‘economic’ regulation of businesses through tariffs and subsidies, and directions to offer services has been much reduced. Two areas where ‘economic’ regulation has been increased, normally on the grounds that it is necessary to promote competition, are access to monopoly services and control over mergers.

The proposed regulations are premised on an assumption of care by the Government. They reject the notion that it is parents who are the most efficient custodians of their children’s interests and interpose a bureaucracy and a credentialism where none is needed. In doing so they will ensure that prices are increased, to the detriment of the parent-consumer and to the taxpayer who pays an increasing proportion of the costs.

The key issue in privatising infrastructure, and arguably the reason for it to be in public ownership, is the concern about natural monopoly. A monopolist is able to extract high prices by reducing availability of supply or access. This concern about “price gouging” and wasted supply is of long standing. From modern economies’ earliest stages, governments have exercised control over infrastructure pricing and access. In their World Bank Note Back to the Future, Klein and Roger document the first monopoly franchises in gas and water starting in the 1820s with rates of returns on gas, water, and rail introduced by the mid 1850s in England and North America.