Thursday, 6 December 2018
I'd like to respond to some of the claims there. It's great to see so many people turning out for my adjournment speech. Obviously this House has passed the encryption laws that are needed for the continuing safety of our country. And if Labor wants to hold those encryption laws hostage in the Senate for their cheap political games, it's on their heads.
I was hoping to take this opportunity to use my time on the adjournment debate to record some of my observations on another important matter that's been discussed in the House this week: competition in the energy sector. I want to make some observations partially based on my experiences working as a regulatory economist in that sector. Firstly, I want to give Australians an assurance that there has been the sort of healthy debate you would expect inside our government when it comes to deciding how best to regulate an industry like the energy sector.
Opposition members interjecting—
Apparently, judging by some of the jeers opposite, that sort of healthy and necessary debate does not really occur in other political parties in our country anymore. That sort of homogenous, non-diverse, unthinking sort of approach is almost terrifying. On this side of the House, for Liberals, we do have a reluctance to regulate markets unless it is necessary to do so. Our policy instincts around promoting freedom, choice and competition have been forged by overwhelming evidence, across the world and going back centuries, that liberal economic policies are proven time and again to lead ultimately to better welfare for humanity. At the same time, the standing assumption behind those policy instincts is that there can be competition and markets in the absence of that regulation.
That assumption is hugely challenged in cases where there is a natural infrastructure monopoly at the heart of a market. There has been much debate in this parliament this week about regulation of the energy sector. There is clearly a natural infrastructure monopoly at the heart of the energy sector. We're obviously never going to see five or six sets of poles and wires running down East Street, with customers getting to choose which one they want to use to supply their premises with electricity. The expense involved in that obviously means there will only be one. So when you have a infrastructure monopoly like that, the default situation is not choice; it's not competition in markets; the default is a monopoly. I want to make the point very, very strongly that monopolies have always been equally abhorrent to liberal economics and our values. The answer, in the least worst kind of way, has always been to regulate these industries in a way that attempts to mimic the outcome of competition. The regulation of these infrastructure monopolies, whether it's electricity, trains, gas pipelines, telco—you name it—is now well established. It has been happening around the Western world since the 1970s.
However, just because the regulation is well established doesn't mean that it stays up to date. This is where we find ourselves. The energy sector is rapidly changing. It's in transition, so the way we regulate the sector needs to be reviewed and kept up to date if we're going to keep attempting to mimic competition where there would otherwise be strong monopolistic tendencies. It can't be set and forget when it comes to regulating monopolies in an industry that's changing rapidly. There has been much said in recent months about conduct that we are starting to observe in energy markets. To my mind the most concerning aspect of that is that we are seeing some very large, vertically integrated power companies using their market power to withhold supply in wholesale markets and then getting windfall gains, either from those same wholesale markets or from retail markets where they also own significant assets hedging against the wholesale. That's what the ACCC says concerns them, too, incidentally. And as the sector changes, as new concerning conduct emerges, as new flaws in the competition we are trying to mimic arise, we do need to keep the regulatory regime up to date.
So I want to put on the record today that the remedies and laws being considered by this parliament are limited to the energy sector. I wouldn't automatically or necessarily support measures like this being extended to other industries, particularly other sectors where there is not a natural infrastructure monopoly being regulated.
I also want to put on the record my strong support for the prerequisite, the requirement, that there is the involvement and the judgement of both the independent competition watchdog, the ACCC, and the judiciary, through the Federal Court, in order to establish that the most severe possible penalties and remedies are appropriate in cases of severe misconduct. And that approach, I think, achieves the appropriate balance in the circumstances of the energy sector.