Australian Politics and Policy - Senior, 2019a

Government–business relations
electricity providers falsely claiming that the carbon pricing scheme was
responsible for price rises. The Abbott government’s Direct Action Plan consisted
of payments to businesses and effectively removed the cost of carbon emissions
from industry and placed the burden on taxpayers.
Government–business relations in the area of industry policy have been far
from ideal over the last decade. Not only have the constant changes in federal
governments (and political leadership) created an uncertain operating environment
for businesses, the lack of stability has also provided little incentive for
businesses to invest in long-term strategy, especially in relation to environmental
sustainability. We now turn to regulation, another important element of
government–business relations.
Regulating business
The rationale for regulation in a market economy stems from a number of concerns.
Whileregulationmayappeartointerferewiththeworkingsofthe‘invisiblehand’
of the market, in the last few decades, most developed economies have been
through phases of deregulation of industries, privatisation of government services
and, more recently, re-regulation to address anti-competitive behaviours, to include
the cost of externalities (such as environmental, social and other related impacts)
notcapturedintheproductionprocessorwherethemarkethasfailed.Regulation
involves governments making laws to influence the behaviour of firms. This can
include rules to prevent anti-competitive behaviour, to protect consumers from
unfair trading practices, to establish safety and other standards, and to achieve
other social or economic policy goals. Traditionally, governments consult with
industry in establishing a regulatory regime to support certain policy goals. Once
the regulatory model has been established, it is standard protocol for regulators to
enforce the relevant laws, rather than contribute to policy debates, and their major
function is to protect the public interest.
There are two major approaches to regulating businesses: ex-ante (before the
event) and ex-post (after the event) regulation. Ex-ante regulationfocusesonthe
structure of markets. This may include the number of firms in a given market,
the conditions for entering a market, the degree of product differentiation and
so on. Ex-post regulation is mostly concerned with the behaviour of firms or the
way they conduct business. This may include how a firm relates to its competitors
and customers. These two approaches to regulating businesses may be used in
combination. For example, to enter the telecommunications industry, firms may
need a specific level of capitalisation and may be required to purchase a telecommunications
carrier licence before operating in the market. Once a firm has
met the requirements to operate in the market, it may then be held accountable
for its behaviour according to the rules that apply within that industry. Various
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