Microeconomics and individual industries (Australia)

Microeconomic reform policies:
- Deregulation
- Reforms to public trading enterprises
- Competition policy
- Environmental management

Deregulation

1980s deregulation of the financial sector:
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Microeconomic policies in 1980s aimed at making the sector’s provision of these services more efficient and competitive.
First step: was The floating of the Australian dollar
- and removal of the RBA’s direct monetary controls over banks
2nd step: the removal of barriers to foreign banks entering the Australian market
a more competitive financial sector allows better - cheaper - access to funds by consumers and businesses
The GFC saw some businesses in the financial sector collapse or be acquired
- Reducing competition in the sector
- Outlined the risks in excessive deregulation
  - as it allowed banks to take too many risks with investors’ money
The Financial System Inquiry/Murray Review (2014) lead to:
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increased minimum capital requirements for banks
- to improve resilience to financial crises
and removal of rules imposing tougher capital requirements for smaller banks (compares with larger banks)
This review proved useful during COVID

In the past, single gov-owned businesses or industry cooperatives had a monopoly on buying farmers’ produce
- in areas e.g. dairy, wheat, wool
Deregulation creates more competition
- Farmers received incentives to innovate and diversify outputs.
- tariff reductions further transformed the agricultural sector.
  - Australia’s agricultural industry became one of the least regulated globally.
Role of climate conditions
- Due to Australia’s venerable position to climate change
  - decline in agricultural productivity attributed to deteriorating climate conditions

dominated by two airline groups:
1. Qantas/Jetstar
2. Virgin Australia
since the sector was deregulated in 1990 more airlines have come in
- Rex & Bonza focused on regional flights
  - have now both gone bust (Aug 2024)

Telstra (formerly a government owned monopoly)
- but was deregulated in 1990
  - forced to let other ISPs use their infrastructure for a fair cost
NBN rollout in 2010s to reduce overall ISP costs

excessive regulation:
- → increased costs, reduced investment, discourage new market entrants
  - → lower eco growth
but excessive deregulation:
- → market failure (lack of competition), economic instability

aims to encourage PTEs to operate independently from the government
Involves:
- eliminating political and bureaucratic supervision
- making the public enterprise managers accountable for enterprise performance
Corporatised PTEs attempt to achieve a rate of return on assets, comparable to private sector companies
- often operating in competitive markets
  - (or regulated monopolies in some cases)
PTEs that have been subject to corporatisation:
- Australia Post
- Energy Australia
- Sydney Water Corporation

privatisation is more extreme than corporatisation
privatisation involves selling off a PTE to the private sector
- e.g. Medibank sold for $5.6 billion (2014)
also frees up capital for gov to finance budget deficits

The National Competition Policy is :: an agreement between Australia’s Federal and State Governments, made in 1995 to encourage microeconomic reform throughout the economy.
- aimed to increase competition → forcing firms to increase efficiency and lower prices for consumers