Light Handed Regulation?

1
Light Handed Regulation?

• Henry Ergas, 14 June, 2006

2
Structure

• Is light handed regulation feasible?
• The UK background
• Australia the Hilmer architecture
• Where to from Hilmer?
• Some current transport issues

3
The UK approach

• The promise of CPI-X regulation
• No need for intrusive and expensive cost studies!
• Reality regulation has become ever more
  intrusive and costly

4
Australia the Hilmer reforms

• Aimed at a single, nationally unified system..
• Has yielded efficiency gains.. But
• Slice and dice approach to industry structure
  complicates investment decisions, especially in
  activities where there are substantial
  complementarities between vertical layers
• Far from being a single uniform system,
  proliferation of regulators and regimes
• Distinction between policy and regulation has
  become blurred, provoking a reaction that
  threatens to re-politicise the process
• Extends risk of being caught in the regulatory
  net to activities that bear no relation to those
  that motivated the Hilmer reforms
• Addressing these issues will require significant
  changes to the post-Hilmer regulatory
  arrangements few signs of progress as of yet

5
The road network

• Inherently requires regulation
• Current lack of clear principles underlying
  structure and mix of private and public
• Gives rise to difficulties exemplified by Cross
  City Tunnel
• Need for Commonwealth to play more of a
  leadership role

6
Conclusions

• Best way to achieve light handed regulation is
  not to regulate where you dont need to
• However, there are areas where regulation is
  inevitable
• In those areas, and especially the road network,
  there is considerable scope to improve on our
  current regulatory arrangements