Estimating the Benefits of Hilmer and Related Reforms

Abstract

The Industry Commission’s 1995 study of the growth and revenue implications of Hilmer and related reforms has been influential in the debate over microeconomic reform. In addition to reform of Telstra, Australia Post, the Federal Airports Corporation, the Civil Aviation Authority, state electricity, gas and water authorities, and rail, road and port authorities, the Commission examined a broad‐ranging program including competitive tendering for the provision of public services, deregulation of the building industry and a move to self‐regulation of industries such as meat processing. The Commission estimated that the implementation of these reforms would result in a 5.5 per cent increase in GDP. In this paper, the Commission’s analysis is subjected to a detailed critique. It is argued that most of the estimated productivity gains are overoptimistic, representing upper bounds to possible achievement rather than likely outcomes. Furthermore, it is argued that the dominant flow‐on effects of microeconomic reform will be negative, arising from the fact that at least some of the workers directly displaced by reform will be permanently displaced from the employed labour force.

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