Andrew Leigh

I spoke in parliament yesterday about supermarket competition, the importance of standing on the side of consumers, and why I'm proud to be a practitioner of the 'dismal science'.

Matter of Public Importance, 15 August 2012

I rise to speak on this matter of public importance relating to supermarket competition, with a particular focus on the importance of maintaining lower prices for consumers. Much of Australia's economic history in the post-war decades is characterised by a somewhat unholy alliance across the major parties to protect producer interests at the expense of consumer interests. So much of the ‘protection all-round’ that prevailed in the 1950s and 1960s meant that Australians paid high prices and that there was less foreign investment. We were less exposed to trade. Our firms were less competitive and our consumers suffered for that. One of the great achievements of the last generation of economic policy makers, thanks to people on both sides of the House, is that we have put the consumer first.

On the issue of food prices, I want to draw the House's attention to rates of food inflation. As it turns out, the series starts in 1974, when the member for Kennedy first entered politics. I note that in that year the rate of annual food price inflation was 20 per cent, and throughout the ensuing decades it has never been that high. Rising food prices have never been a worse problem for Australia than they were at the time that the member for Kennedy began his political career as a National Party member in the Queensland parliament. Indeed, if we look over the series of figures we can see that in the last two quarters—the March 2012 and June 2012 quarters—food price inflation has been negative. This means that Australians are paying less for the same food items than they were paying a year before. We should be celebrating this fact—it is a huge win for Australian consumers. We do not only see this with food prices; the past 20 years have seen real prices for imported furniture, handbags, clothing, shoes and medical products roughly halved, and prices of computers, telephones and other electrical goods have fallen by about two-thirds. To a large extent it is the opening-up of the market that has kept prices low across the board. Inflation was 6.7 per cent in the 1950 to 1985 period; since then, it has averaged just 3.7 per cent. The rise of China has been a major dampening force on global price inflation.

The matter of public importance today looks in particular at the role of supermarket competition and its price impacts. On this question it is worth referring to the ACCC's inquiry of July 2008 into the competitiveness of retail prices for standard groceries. The report notes, as the member for Kennedy has pointed out, that Coles and Woolworths account for approximately 70 per cent of packaged grocery sales in Australia and approximately 50 per cent of fresh product sales of goods such as meat, fruit and vegetables. But the report also notes:

'There is little evidence to suggest that Coles and Woolworths have simply ‘bought out’ the competition.

'Millions of Australian consumers shop at Coles and Woolworths in preference or addition to a number of alternatives—the local independent, the specialty bread shop, the Saturday market and/or the corner shop. High concentration levels alone do not dictate the nature of competition. There are other markets internationally that are more concentrated but appear to be more competitive.'

It goes on to say:

'... ALDI has been a significant influence on Australian grocery retailing. ALDI has forced Coles and Woolworths to react by reducing prices—specifically in States and localities where ALDI is present. Even if a customer does not shop at ALDI, they obtain significant benefits from having an ALDI in their local area or state, as the Coles and Woolworths stores price more keenly.'

ALDI has now opened more than 250 stores across Australia. Costco has committed $140 million to ramp up its Australian operations. The government recognises that competition in the grocery retail sector is absolutely critical to making sure that Australians have a good range and cheap prices when they shop in their stores. It is important to constantly return to the facts when we are speaking about prices, not just of food and groceries but also of items across the board. Those opposite have been banging the cost-of-living drum but are unwilling to level with the Australian people about the fact that the inflation rate is the lowest it has been in the decade.

I am pleased in my own electorate to have opened the Bonner Woolworths, which is one of the smallest stores in Australia, and the Canberra Airport Woolworths, which is one of the largest stores in Australia. The Canberra Airport Woolworths will go head-to-head with Costco. It will have some of the cheapest prices available to consumers, and that means that Canberra families will find their household dollar going further. In Dickson, where there is now a Woolworths, there will soon be an ALDI, and the ACT government has opened up a space for a third supermarket to be determined in February next year.

We are introducing additional measures to bring more competition to the grocery retailing industry and to reduce barriers to entry; we are extending the timeframe for the development of vacant commercial land from 12 months to five years to bring new competitors into the market; we are clarifying the predatory pricing and misuse of market power provisions in the Competition and Consumer Act 2010; we are clarifying the operations of the mergers and acquisitions provisions in the act on creeping acquisitions; and we are introducing a mandatory, nationally-consistent unit pricing regime, because we recognise that unit pricing allows Australians to shop around.

There are two schools of thought in this parliament on economic policy. There are those who largely support the market-oriented, liberalising economic reforms of past decades, and there are those who are willing to go for the populist grab every chance they get. When the member for Kennedy left the National Party in 2001, it was the National Party of Tim Fischer and Mark Vaile, which was committed to these liberalising market reforms. We now see a struggle for the soul of the National Party, and frankly I think that the National Party is coming back after the member for Kennedy. We hear quotes from Senator Joyce that, for example, the carbon price would raise the cost of a leg of lamb to $100. This is the same Senator Joyce who gets his millions and billions mixed up; the same Senator Joyce who, as the member for Blair has pointed out, is in direct contradiction of the Leader of The Nationals on the issue of comparing farm-gate and retail prices for major grocery items.

We also see a struggle for the soul of the National Party in the current debate over foreign investment. I will be clear: I support foreign investment. It increases the number of jobs and increases wages in the Australian agricultural sector. I pay tribute to some of those opposite, who have been willing to be very clear about the facts in this debate. Former Treasurer Costello even has an opinion piece in the Sydney Morning Herald today making the case for foreign investment.

If all Australia's foreign investors were to pull out tomorrow, we would lose one in eight jobs—one in eight workers are directly employed by a foreign-owned firm.

So it is important to realise the fire the coalition are playing with as the Nationals return to the party of economic populism, rather than being the party of national interest as they were under Mark Vaile and Tim Fisher. The Leader of the Opposition seems to be flirting with the same tendencies. He said:

'I have never been as excited about economics as some of my colleagues; you know, I find economics is not for nothing known as the dismal science.'

Let me be clear why economics is known as ‘the dismal science’. The ‘dismal science’ was the tag that Thomas Carlyle gave to economics because it held what he thought was the ‘dismal’ notion of racial equality. Frankly, I am happy to hold to the notion of racial equality, I am happy to be a practitioner of the ‘dismal science’ and I am happy to be standing on the side of consumers today.

More on Labor's tradition of supporting consumers here.