The Sharing Economy

Business Educators Australasia National Conference 2016

Chris Lock, Director, Economic Policy

Department of Treasury and Finance

29 September 2016

• Sufficient potential sellers for buyers • Sufficient potential buyers for sellers • Access to the market or exchange is low cost • Confidence:

• Buyers have sufficient confidence in the quality of the good or service for sale.

• Buyers are confident they will receive the goods or services

• Sellers are confident they will receive the money and face no unexpected supply costs or risks

Key features of markets

4

In many markets there are risks to buyers…

..

5

Yet there are risks to sellers too…..

Landlords….. Taxi drivers….

6

Small markets are generally inferior…

7

Small markets are generally inferior… … to larger markets

What is the “Sharing Economy”?

Not strictly defined, but…

• it’s a particular type of market involving giving customers access to expensive items that may be used, at times, by the seller, in return for a fee: • through an internet business platform • often not a primary income source for the seller

Airbnb, Stayz

• Host not necessarily present

• Expensive underutilised asset

• Possibly servicing unmet demand

Uber

• Significant asset being put to greater use

• Includes dedicated labour

• User avoids ownership and maintenance costs

Ebay, AirTasker, Luxe & other

“peer to peer” businesses

• Internet versions of normal “buy & sell” markets for goods and services

Eatwith

• Requires premises to be provided by the host

• Provision of time, labour, food and drink

• Usually requires a ‘critical mass’ for any event to be viable

Airbnb

Public passenger transport market

• Buses, coaches, trains and trams

• Taxis

• Luxury hire cars

• Other hire car services

• Taxis in Tasmania Hobart • 24 taxi areas (a taxi can only operate in its own area),

• 429 perpetual licences 228

• 107 owner operator licences 89

• 83 wheelchair accessible taxis 50

Serious in-roads…

Uber • Uber provides point-to-point transport that is

cashless

• Passengers get an estimate of the fare in advance, and are charged via credit card

• In Melbourne (as of 30 March 2016), standard price is:

• a minimum $6 fare

• base fare is $2

• plus $0.32/min AND $1/km

• Uber may use “surge pricing” in times of high demand

• Uber has operated in Australia, unlawfully in some cases - but not Tasmania

…and the role of Governments?

• Is competition ‘fair’?

• ..or should some traditional businesses end up like the dinosaurs?

• Is compensation the answer?

• Do governments even have to regulate ?

Can Governments take this approach?

Short stay accommodation: Policy responses

• Tasmania (proposed): regulation for more than 42 days’ use per year

• Victoria: permitted – planned legislation to eliminate bad behaviour in short stays

• NSW: currently inconsistent regulation across councils – Parliamentary inquiry underway

• SA: permitted if own home is leased

• Q: permitted – new council powers to tackle behavioural issues

• WA: inconsistent regulation -fines up to $200 000 in some municipalities

• ACT: could be breaching Crown lease conditions or building laws

• NT: appears to be permitted

Ride sourcing: Policy responses • Tasmania:

• Ride sourcing will be regulated the same as luxury hire cars • No compensation to taxi owners but no new taxi licences for 3 years • Passenger transport framework under review

• Victoria (proposed): • Complete revamp of commercial passenger industry with driver accreditation (to

include ride sourcing businesses) but all taxi and hire car licences to be abolished • Compensation to existing taxi and hire car licence holders ($ 378 million) • Also a $50 million “Fairness Fund’ for those facing hardship • Funded by a $2 per trip levy for all commercial passenger vehicles

• NSW: • Ride sourcing allowed to operate, alongside licensed taxis with more flexibility in

taxi fares • No new taxi licences in Sydney for 4 years • Compensation to taxi licence holders ($250 million) • Funded by a $1 per trip levy for all commercial passenger vehicles

Ride sourcing: Policy responses (cont…) • Queensland:

• Ride sourcing operating lawfully from early September 2016 • Compensation to taxi owners and some fees and charges waived. • Also a $26.7 million “Hardship Fund’ • No new taxi licences likely before 2018

• South Australia • Ride sourcing operating lawfully from July 2016 • Compensation to taxi owners funded by a $1 levy per ride • General taxi fare increase, and increased taxi fares for Friday and Saturday night

(up 20%)

• Western Australia • Legislation in Parliament to make ride sourcing lawful • Compensation to taxi owners and $6 million hardship fund • the cap on owned taxi plates (5) will be lifted • $800 per year costs for ride sourcing drivers

Ride sourcing: Policy responses (cont…)

• ACT • The first jurisdiction to allow ride sourcing to operating lawfully (October 2015)

• No compensation to taxi owners: taxi licence fees down from $20 000 to $5 000

• Lower fees for hire cars - from $4,600 to $100 a year

• Some regulatory requirements on taxis removed

• Northern Territory • Ride sourcing is not lawful now but may be permitted under the new government

Concluding thoughts…

• Technology can bring about major changes in markets – and very quickly

• The benefits encouraged operators to act unlawfully...

• …which accelerated a response from governments including some major changes in the regulation of the industry

• The more heavily regulated an industry, the greater the prospects for compensation..

• …funded in large part (for a time) by consumers

Department of Treasury and Finance

Any questions?