[Vic]Report confirms open access fears

["James C." <james_ccj@optusnetdotcomdotau>]

http://www.theage.com.au/business/2001/04/09/FFX9C8FO9LC.html

Freight Australia has welcomed a landmark Productivity Commission report on
regulation of infrastructure. The report bolsters its opposition to the
State Government's proposed open rail access regime.

Freight Australia, Victoria's main rail freight operator, said the
commission's report on regulation of Australia's key infrastructure had
highlighted concerns that inappropriate access regimes would stifle
much-needed investment.

The company's chief executive, Marinus van Onselen, said warnings in the
commission's draft report closely paralleled Freight Australia's opposition
to the Victorian Government's decision to "declare" the state's rail freight
network open to all comers from July 1. Freight Australia says the pricing
guidelines put at risk the company's $263 million investment to date.

Mr van Onselen said the commission also recommended the retention of a
national access regime, echoing another of Freight Australia's concerns.
This was in stark contrast to the current situation in which individual
states, and notably Victoria, were pursuing individual regimes in a
dangerous repeat of the nation's infamous break-of-gauge blunder, he said.

The report, released last month, said infrastructure regulations intended to
promote competition could make consumers worse off in the long-term.

Three commission reports found that national competition policy had gone too
far and could prevent firms building new infrastructure crucial for
long-term prosperity.

Commission chairman Gary Banks warned that the quality of Australia's
infrastructure was at risk if the Federal Government did not substantially
water down the regulatory regime imposed on assets worth more than $100
billion. "It is important to have an effective regulatory framework for
essential infrastructure services," Mr Banks said. "But regulations should
avoid promoting competition and lower prices at the expense of the necessary
investment in this important area. Otherwise consumers could eventually
become worse off."

The key recommendation was that the Federal Government radically change the
law allowing firms access to each other's infrastructure. The law, called
the national access regime, is intended to increase competition because
ownership of large assets such as gas pipelines and rail lines can lead to
monopolies.

But the commission argued that an unwanted side-effect was that the regime
discourages investment because firms face the threat of other businesses
gaining access.

Mr van Onselen said the commission's findings provided categorical
reinforcement of the arguments the company had been putting to the State
Government.

"Unfortunately, what the commission warns of is already happening here in
Victoria, with Freight Australia's private owners suspending all
discretionary expenditure on rail network infrastructure renewal," Mr van
Onselen said.

"And that decision has been taken precisely because the proposed pricing
regime for open access fails to give proper regard to incentives to invest."



Cheers
James