In a desperate attempt to distract attention away from their $50 billion tax cut to large companies, the Turnbull government attempted today to pretend that it is serious about reducing multinational profit-shifting.
It is not.
As usual with this government, you have to follow the numbers, not the spin. The Coalition’s diverted profits tax will raise just $200 million over the forward estimates.Read more
Competition is the best way to fuel growth and end tacit collusion, Herald Sun, 5 February 2017
Do you know which day of the week is cheapest to buy groceries? Or which day of the week is cheapest to buy whitegoods, cars and home appliances? Spoiler alert: there isn’t one! So why is there a cheap day to buy petrol? If hundreds of petrol stations really are engaged in dog-eat-dog competition, why do they all raise prices on the same day of the week?
After decades of researchers trying to understand bowsernomics, a new study may have cracked the nut. Economists David Byrne from the University of Melbourne and Nicolas de Roos from the University of Sydney analyse nearly 2 million daily petrol prices. Alarmingly, they find that petrol retailers have been engaged in ‘tacit collusion’, resulting in coordinated prices, less competition and higher margins for retailers.
To be clear, these experts are not alleging the type of collusion that involves secret meetings, fake moustaches and disposable mobile phones. Rather, it is ‘tacit’ collusion where, through a gradual and unspoken process, firms slowly converge on the same pricing strategy so as to maximise revenues.
Sifting through the data, the researchers produce the economic equivalent of an Agatha Christie novel. They find that the dominant firm, BP, performed the role of the price leader. BP’s prices acted as a focal point for the broader market to converge on. Through a long process of trial and error, by 2010 all petrol stations had adopted the same pricing strategy.
Here’s how the game ended up being played. Every Thursday prices went up by 15-20 cents per litre. Then, for the next six days, the price fell by 2 cents each day. Like clockwork, the cycle repeats itself week after week. The only change was in 2015, when all petrol stations switched from Thursday price jumps to Tuesday price jumps.Read more