The Productivity Commission has warned that Australian consumers could be hit harder by the cost of living crisis if the government tears down Australia’s supermarket duopoly.
The warning comes as food prices surge and supermarket giants Coles and Woolworths report growing profits.
German-based Aldi took a 9.5 percent stake, IGA 6.9 percent, and smaller grocery retailers constituted the remaining 18.6 percent.
Meanwhile, Coles’ net profit rose 4.8 percent from $1.05 billion to $1.10 billion in the last financial year.
Speaking at the National Press Club on Aug. 23, Productivity Commission Chair Michael Brennan, who will retire in the next couple of months, said there was a need for more competition in the grocery market.
However, he noted that there could be unintended and adverse consequences for shoppers if the government broke down the Woolworths-Coles duopoly.
“It’s easy to look at that aggregate and say we need to break that down. We need competition,” he said.
“[But] in many cases, consumers feel better off when they’ve got a Coles or Woollies because the prices are cheaper and the range is better.”
At the same time, the commission chair explained that the duopoly existed not because there were problems within consumer or competition laws but rather Woolworths’ and Coles’ ability to outperform their rivals.
Nevertheless, Mr. Brennan said the government had started to tackle the issue of high market concentration by working directly with other supermarkets.
“When governments are worried about that and want to bring in a Costco, often governments have taken a very proactive stance about allowing or holding hands of the inbound investor to navigate the planning system: identify sites, understand the rules, work with councils,” he said.
High Food Prices Bring More Pain to Consumers
According to the Australian Bureau of Statistics, the prices of food and non-alcoholic beverages in general rose by seven percent in the 12 months to June 2023.Dairy and related products saw the highest growth at 15 percent, followed by bread and cereal products at 10.9 percent and unclassified food products at 10.5 percent.
In contrast, fruit and vegetables, as well as meat and seafood, had seen much softer growth at one percent and 2.7 percent, respectively.
Specifically, avocado prices jumped 37 percent during the period, compared to a 25 percent rise in canned tuna. Skim milk surged by 20 percent and frozen vegetables by 18 percent.
On the downside, tomato prices plunged 56 percent, followed by lettuce at 37 percent, and carrots at 23 percent.
She also noted that it currently costs a family $600 a fortnight to buy a healthy diet and that every $1 increase across all different types of products would accumulate.
Many community members also complained about the impact of high food prices on their budgets and wanted the government to take some action to reduce their burden.
