Andrew Leigh

FRESH AND FAIR COMPETITION

National Farmers’ Federation Horticulture Council Roundtable

Wednesday, 28 February 2024

I acknowledge the Ngunnawal people, on whose lands we meet today, and pay respects to all First Nations people present.

Australia’s agriculture sector has hung its hat on technology to deliver a strong productivity performance over the past 20 years (Treasury 2023 p84).

As Australia’s third largest agricultural industry, horticulture is a significant part of the innovation story (DAFF n.d).

We are now seeing overhead cameras and artificial intelligence speeding up processing times by detecting and accurately determining the size of up to 5,000 pieces of fruit in the back of an open-top truck (AUSVEG 2023).

Researchers are testing drones – and the turbulent downdraft they create – as a possible way to pollinate glasshouse-grown strawberries and tomatoes (Jadhav 2023).

Growers are maximising their output by taking tonnes of otherwise wasted vegetables and turning them into nutrient-dense powders for supplements and our morning smoothies (AUSVEG 2023).

Governments are joining forces with industry to revamp pest-management datasets to further strengthen our arm at the trade negotiating table (Watt 2023).

One of the best things we can do to keep our economy innovating – and keep improving standards of living – is competition reform.

Competitive markets aren’t just good for consumers. Competitive markets can increase incentives and opportunities for businesses to invest and innovate – a dynamic which has helped the horticulture industry grow the value of its output and exports in the past 20 years (ABARES 2023).

Yet there are worrying signs that the intensity of competition is weakening in parts of the economy with evidence of increased market concentration and markups in several industries (Leigh 2022).

Entry and exit rates of employers, job reallocation, proportion of high growth firms, and proportion of employment by young firms have all declined since the early 2000s – similar to other OECD economies (Leigh 2024).

I met with the National Farmers’ Federation in December to discuss these concerns and the Albanese Government’s proposed actions on competition, and I am pleased to update the Horticulture Council on recent developments (NFF 2023).

Food and Grocery Code of Conduct

First, the Government has taken action to make sure the Food and Grocery Code of Conduct is working effectively and fairly.

The prescribed voluntary Code was introduced in 2015 to improve behaviour in the way supermarkets deal with suppliers – including growers where they supply directly to supermarkets.

In January, we announced economist and former competition policy minister, Dr Craig Emerson, will lead the statutory review of the Food and Grocery Code of Conduct.

As part of the terms of reference, we have asked Dr Emerson to consider whether the Code should be made mandatory and whether it should include civil penalties (Treasury 2024).

Earlier this month, Dr Emerson released his consultation paper seeking feedback from stakeholders on the Code. Dr Emerson will produce an interim report, followed by a final report based on responses to the interim report.

Inquiry into supermarket pricing

Second, we have announced the Australian Competition and Consumer Commission will undertake a 12-month inquiry into supermarket pricing.

The formal inquiry will allow the watchdog to lift the lid on competition and pricing practices in the supermarket sector for the first time in more than 15 years.

As part of the direction to the Australian Competition and Consumer Commission, we have asked them to examine factors influencing the pricing of groceries along the supply chain, including the difference between farmgate and supermarket prices.

The Australian Competition and Consumer Commission will start the inquiry by publishing an issues paper and I encourage you to have a say.

CHOICE retail reports

Third, we have announced funding for consumer group CHOICE to produce quarterly reports on retail grocery prices.

The CHOICE reports will compare grocery prices at different retailers, highlighting those charging the most and the least.

Starting from the second quarter of 2024, this price transparency is primarily about helping shoppers make informed choices about food and grocery purchases.

Competition Taskforce

Finally, I want to share some updates on the Competition Taskforce’s activities.

Data strategy

The Taskforce’s role is to produce practical policies that will boost competition and help fuel innovation and wage growth.

That includes taking a fresh approach to understanding Australia’s competition landscape.

The Taskforce is partnering with other agencies and academics to analyse large datasets that have only just become accessible in recent years.

For example, the Taskforce has crunched microdata on labour flows to track mergers and acquisitions.

The Taskforce’s initial results reveal there are between 1,000 and 1,500 mergers each year – two or three times the number voluntarily notified to the Australian Competition and Consumer Commission.

The results also show that acquisitions are disproportionately made by huge firms. The largest 1 per cent of firms make around half of all acquisitions.

So, putting microdata under the microscope helps provide a more detailed picture of competition than we have had before.

I look forward to sharing further findings later this year as the Taskforce examines data on aviation, non-compete clauses and the links between innovation and competition.

Mergers

After receiving a broad range of views from submissions and in its consultations, I also look forward to receiving the Taskforce’s advice on whether Australia’s current merger regime is fit for purpose.

Most mergers don’t raise competition concerns but the small number that do require close scrutiny as they can have a profound impact on the economy including particular markets.

At a time when many other countries are reviewing their merger regimes, it’s only sensible to consider whether Australia’s laws, processes and regulations need an update.

Competition actions

The Australian Competition and Consumer Commission’s supermarket pricing inquiry, Dr Emerson’s review of the Food and Grocery Code of Conduct, and the Competition Taskforce’s activities build on the competition actions we have already taken.

We have increased penalties available under the Competition and Consumer Act to ensure a level playing field for all Australian businesses, big and small.

We have delivered on our promise to strengthen unfair contract term laws, a move the National Farmers’ Federation welcomed (NFF 2023c). And we have consulted on options to address unfair trading practices that may currently fall outside the scope of the Australian Consumer Law.

We have introduced legislation in the House of Representatives to provide designated consumer and small business advocates with a process where they can report significant or systemic market issues to the Australian Competition and Consumer Commission.

And the Albanese Government has secured agreement from state and territory treasurers in December to revitalise National Competition Policy and commit to developing an agenda for pro-competitive reforms.

On a practical level, we are providing support for small businesses via the Digital Solutions program so they can compete online and make the most of digital opportunities.

Small businesses in the horticulture industry can access workshops and webinars at no cost. And for a small fee, they can access up to four hours of one-on-one advice from a business advisor.

Each of these actions is about making our economy more competitive – encouraging more innovation and increasing productivity in the decades ahead. And I appreciate the opportunity to update you on recent developments and the Government’s actions.

Thank you.

References

Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) Agricultural commodities: December quarter 2023 - Statistical tables Table 3 Farm production: value, volume and price indicators Australia and Table 4 Agricultural exports: value, volume and price indicators Australia.

AUSVEG 2023 Horticulture industry’s best and brightest recognised at Hort Connections Horticulture Awards for Excellence Media Release issued 8 June 2023, AUSVEG.

Department of Agriculture, Fisheries and Forestry (n.d) Australian horticulture website content.

Jadhav S 2023 Development of non-biological pollination options for protected cropping using emerging technologies Hort Innovation Final Report.

National Farmers’ Federation (NFF) 2023a Farmers raise competition concerns at industry roundtable, Media Release issued 7 December 2023, National Farmers’ Federation.

National Farmers’ Federation (NFF) 2023b Competition review welcome but must deliver outcomes Media Release issued 23 August 2023, National Farmers’ Federation.

National Farmers’ Federation (NFF) 2023c A win for competition as Government brings in new penalties for unfair contract terms, Media Release issued 10 November 2023, National Farmers’ Federation.

National Farmers’ Federation (NFF) 2024 NFF calls on Food and Grocery Code review to give code teeth Media release issued 10 January 2024, National Farmers’ Federation.

Hort Innovation 2023 Contribution of Australian horticulture Industry Report prepared by the Centre for International Economics for Hort Innovation, Hort Innovation.

Leigh A 2022 A More Dynamic Economy The Australian Economic Review, 55: 431-440.

Leigh A 2024 Game changer: harnessing microdata for a fairer competition landscape Address to the Chifley Research Centre, Melbourne, delivered 30 January 2024.

Treasury 2023a Working Future: The Australian’s Government White Paper on Jobs and Opportunities Treasury.

Treasury 2024 Food and Grocery Code of Conduct Review 2023–24 – Terms of reference Treasury.

Watt M 2023 Joint media release: Historic $130m trade alliance to supercharge Aussie horticulture exports [Media release issued 14 August with Queensland Minister for Agricultural Industry Development and Fisheries and Minister for Rural Communities].