from the Sydney morning herald

loopholes prevent action on petrol

‘The national competition watchdog will remain toothless in its attempts to tackle alleged price gouging by oil companies because of loopholes in legislation and the failure of the Federal Government to outlaw cartels, a competition and fair trading expert says.

The Prime Minister, John Howard, said the chairman of the Australian Competition and Consumer Commission, Graeme Samuel, "only needed to ask" for more power to pursue oil firms.

But Professor Frank Zumbo, of the Australian School of Business at the University of NSW, said Mr Samuel would need to do more than that because under the Trade Practices Act it is virtually impossible to prosecute unless it can be proved that a company dominates its market to the point where it can operate unilaterally.

"The key test is whether a company has a substantial degree of market power - and such a degree of market power that it is a monopoly, that it has the ability to destroy competition, because it can afford to raise prices without losing business," he said.

"Few companies in Australia have that power. Oil companies are an oligopoly, Coles and Woolworths are a duopoly. So these companies are not caught under the act."

Professor Zumbo said last week's failure by the commission to prove a case of price collusion against a group of Geelong petrol retailers demonstrated the urgent need to grant the watchdog powers to tap telephone conversations, something else the Trade Practices Act failed to grant.

Moreover, a promise by the federal Treasurer, Peter Costello, three years ago to outlaw cartels in line with overseas jurisdictions had failed to materialise, he said.

meanwhile, Alan Ramsey observes …..

Three decades later and it sounds not unlike the Australian Competition and Consumer Commission's futile attempts these days to curb the greed of the oil companies in ripping off motorists while Howard, in an election year, huffs on the sidelines and the Herald runs front-page stories under the headline "This petrol rip-off must stop: PM". Howard actually said nothing so graphic and those with long memories of his demolition of the PJT in the 1970s will only snort derisively. Our Prime Minister is a creature of the corporate world and behaves accordingly.

He always has done.

As for Howard's economic credentials, given the economy is what he seeks to make the electoral battleground this election year, let me remind you just how ratty it was during his five years and four months as Fraser's treasurer. That is, from November 1977 until the Coalition's defeat in March 1983. Howard cannot now steal Costello's headlines. As he acknowledged on radio in his testimonial on Monday, they belong to his deputy.

I asked Fraser this week why he'd ever made Howard treasurer. To get his predecessor, Phillip Lynch, out of the headlines, he replied without hesitation. Lynch at the time got caught up in a land scandal at a place called Stumpy Gully on Melbourne's outskirts. Fraser, having already launched the 1977 election campaign a year early, was desperate to bury Lynch until after polling day. He succeeded. Howard replaced him as treasurer. Four years later he also replaced Lynch as Fraser's deputy.

Howard brought down his first budget on the night of August 15, 1978. He would deliver four more budgets. At no time in his five years and four months in Treasury would it ever get any better than it was on the night of that first budget. Inflation at the time was 7.9 per cent, down from 12.3 per cent six months after the Fraser government gained office. Home mortgage rates were 10 per cent. Unemployment was 6.2 per cent. Over the next five years mortgage rates would dip, for one year, to 9.5 per cent and unemployment would hit a low, in June 1981, of 5.4 per cent.

But the budget outcomes announced on the night of August 15, 1978 would never be as good, overall, for Howard's stewardship of the economy ever again. And when he left the Treasury after Labor's victory under Bob Hawke in March 1983, all of the key economic indicators would be much worse than when he arrived more than five years earlier. Inflation stood at 11.1 per cent, unemployment at 10 per cent, and home mortgage rates at 13.5 per cent.

I detailed these figures during the 1996 election campaign that ended Paul Keating's government and made Howard prime minister. I pointed out how Labor's 13 years in office had achieved far more, in absolutes, for the Australian economy than had Howard's five years as treasurer, despite the appalling peaks under Labor of 17 per cent mortgage rates in late 1989 and a million unemployed in late 1992. So that when Labor left office in March 1996, inflation stood at 5.1 per cent (11.1 per cent inherited from Howard in March 1983), unemployment was 8.6 per cent (10 per cent inherited), and home mortgage rates were 10.5 per cent (13.5 per cent inherited).

Thank you, John Howard, treasurer.’