The prominent economist and Reserve Bank board member Ian Harper has warned the Morrison government against pursuing its controversial “big stick” legislation, declaring “overreach” in Australia’s energy sector would likely be harmful.

Harper, who was appointed by the Coalition to review Australia’s competition policy and serve on the central bank board, has used a submission to a parliamentary inquiry to warn the Morrison government against pursuing special sanctions for the energy sector.

Harper’s competition policy inquiry recommended changes to the misuse of market power provisions in Australian trade practices law, but did not recommend a divestiture power because it was considered unnecessary and undesirable.

The prominent economist and dean of the Melbourne Business School says in his submission to the inquiry that divestiture powers – which are being proposed in the so-called “big stick” package – were avoided in his review because “they are unpredictable in their impact and may even be counterproductive if the segregated entities prove to be commercially unviable, potentially leaving the market less competitive after forced divestiture than it was beforehand”.

He says the powers being proposed in the government’s energy policy overhaul “are neither necessary nor desirable”. Harper says changes to the misuse of market power provisions, which the parliament has now adopted, has given regulators sufficient power to take action if there is anti-competitive behaviour in the energy sector.

He says competition policy should not discriminate against particular sectors of the economy, and to do so “distorts investment decisions, promoting inefficiency and ultimately harming the interests of consumers”.

Harper says singling out one industry for a particular sanction would create “more intrusive regulation imbalances” in competition policy. He says his competition inquiry rejected calls to single out supermarkets and fuel retailers for special treatment for that reason.

“Over-reach is harmful because it is counterproductive – it harms competition by penalising pro-competitive conduct,” Harper says.

“The threat of divestiture discourages investment and hence the entry of new capital into an industry. Actual forced divestiture may reduce rather than increase the number of competitors in an industry if the dismembered parts of a corporation are commercially unviable”.

The expert critique comes as the “big stick” package faces amendments in the event it clears the House of Representatives in the short parliamentary sitting period before the federal election.

On Monday the Centre Alliance senator Rex Patrick confirmed the party’s intention to push amendments in the Senate to extend the divestiture powers beyond the energy industry to the economy-at-large – a development he flagged to Guardian Australia late last year.

Patrick told Guardian Australia the Centre Alliance plan would amend the government’s “big stick” legislation to allow courts to break up companies found to have “abused their market power” in any industry – an idea that may win support from Nationals who have long championed such a mechanism.

He said the party would then push for a second divestiture power in corporations law for other forms of misconduct, in circumstances such as the banks’ conduct revealed at the financial services royal commission.

Patrick said the threshold for that penalty was “still under consideration”, with options including listing particular offences where divestiture is available or specifying courts only break companies up where they have engaged in “egregious” or repeated offences.

Centre Alliance cannot introduce the second plank into the government’s energy bill, but Patrick said it was “inevitable” that recommendations of the royal commission will require corporations law changes that will provide an opportunity.