House debates

Wednesday, 28 February 2024

Matters of Public Importance

Grocery Prices

3:24 pm

Photo of Andrew LeighAndrew Leigh (Fenner, Australian Labor Party, Assistant Minister for Competition, Charities and Treasury) Share this | Hansard source

It is a great thing in this House to be discussing the important issue of competition, and for that I thank the member for Kennedy for bringing forward this matter of public importance.

If you're a sports fan in Australia you have plenty of choices. If you're an AFL fan you've got 18 teams to choose from. If you're a fan of the Women's Big Bash League you've got eight teams to choose from. If you're a fan of the Australian Ice Hockey League you have 10 teams to choose from including the Canberra Brave, the Central Coast Rhinos, the Melbourne Mustangs and the Sydney Ice Dogs. If you're an A-League fan you have 12 teams to choose from. The fact is that many of these leagues are also growing new teams, so we've had the GWS Giants and the Tasmanian JackJumpers.

However, in business you'd be lucky if you had not 18 choices, not eight choices but just a few, because too many Australian industries—from banking to baby food to beer—are dominated by just a couple of big firms. While we've seen our sporting codes growing new teams, the trend in corporate Australia over the last generation has been towards mergers. Over the past 30 years the number of corporate mergers has grown by a factor of six and the value of corporate mergers has grown by a factor of 11. If our sporting codes had gone the same way we'd all be barracking for the same few teams.

The result of these mergers has been that over the course of the last couple of decades we've had an increase in market concentration and we've seen an increase in mark-ups—the gap between prices and costs. We've seen a decline in the job switching rate, which matters because switching jobs is typically the best way of getting a pay rise in the career of a typical employer. If we look at the start-up rate focusing on employing small businesses, Australians are starting fewer firms now than in the past. The result of increasing market power is that consumers pay more, farmers earn less and small businesses are constrained. More competition, on the other hand, is good for consumers, good for workers and good for innovation.

We were talking during question time about the gender pay gap, and it turns out that more competitive sporting codes tend to have less discrimination. We've seen that in major league baseball because as it became more competitive, racial pay gaps narrowed. We've seen this with the gender pay gap in banking. To go back to the example of sport, vigorous competition can be a force for egalitarianism. Kenyan runners dominated the marathon because the world marathon made it a serious sport with serious prize money. They were then able to compete on that level playing field.

Conversely, a lack of competition most hurts the poor. The member for Kennedy has talked about the impact on farmers, but it's also true that we see a lack of competition having an adverse impact on low-income consumers. If you don't have a car you can't drive to a cheaper supermarket. If you don't have a good internet connection you can't connect up to get good online sales. It's no coincidence that payday lenders are going door to door in the poorest communities.

Competition keeps prices low and encourages firms to innovate. If consumers can choose, they're less likely to be gouged on price. If workers can choose they're more likely to get a fair return for their labour. We know competition is important for spurring economic growth. We saw this in the 1990s when the reforms of Fred Hilmer and Paul Keating kicked off one of the most productive decades in the postwar era, during which we had strong growth in labour productivity. At the end of that decade there was a permanent 2½ per cent increase in national income, which in today's dollars is equivalent to some $5,000 a household.

We have instead had a lousy period of productivity growth. Under the former government we had labour productivity growth at its slowest rate in the postwar era. We have a lot of stasis in the Australian economy. If you go back to the mid-1980s the biggest Australian firms in the stockmarket were Westpac, the Commonwealth Bank, NAB, ANZ and BHP. Now they're Westpac, the Commonwealth Bank, NAB, BHP and CSL. Don't worry too much about ANZ because it's sitting just behind the pack. Monopoly power transfers resources from consumers to shareholders, thereby worsening inequality. We are committed to the fair go on this side of the House, and you can't have a fair go without fair competition.

The member for Kennedy mentioned some of the history of supermarket aggregation but he did not go very far back. It is somewhat surprising, as the member for Kennedy has been a member of parliament since I was two years old—in 1974—taking only a year out between the Queensland and the national parliaments. Let me take him back a little further.


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