SUBJECTS: Grocery Inquiry, GROCERYchoice Website, Unit Pricing
KIERAN GILBERT:
…As the Government provides its response to the consumer watchdog's inquiry in to grocery prices. Including a mandatory regime into unit pricing and a website to help people choose the best price in their local area. I spoke to the Assistant Treasurer Chris Bowen a little earlier in the day and I began by asking him – isn't there only so much the Government can do, given the ACCC says the majority of factors pushing up prices are outside of Government control. Like demand in international markets and weather conditions.
CHRIS BOWEN:
Well, the ACCC does find that the majority of the increase in food price inflation and grocery inflation over recent years has been due to those factors, but they do also make a series of recommendations as to how we can introduce more competition, or encourage more competition into the grocery market and they do say that consumers will benefit from competition.
They call the grocery market in Australia 'workably competitive', in other words, it works but it could be better. It could be more competitive, there could be more vigorous competition and they point to Aldi, for example, as an entrant to the Australian grocery market which has made a difference for consumers and everybody has benefited from their entry and the downward pressure it's put on prices.
So, we do need to have more competition in the Australian grocery market and Governments can encourage it. We can't force people to enter the Australian grocery market, but we can ensure that our policy settings are in place to ensure we have the most competitive grocery market possible.
KIERAN GILBERT:
So the recommendations that you're adopting are really going to only have an impact at the margins?
CHRIS BOWEN:
Well, the increase in food inflation over recent years has primarily been to other factors, that's correct. But we can do things at the margins which do make a difference and we can give consumers more information.
One of the recommendations of the ACCC, for example, is unit pricing, which will mean that consumers have more information when they're at the supermarket, deciding what to buy and what provides the best value. We're also putting online tomorrow, our GROCERYchoice website which will provide consumers with information as to the cheapest grocery store in their region, on a month-to-month basis. So it will be up to people to make, of course, their own choices about where they shop. But we want to give people as much information as we can and there will be some very interesting information coming out of that website and out of unit pricing and out of the other reforms arising out of this report.
KIERAN GILBERT:
On the unit pricing – can you explain to our viewers what that means, and secondly, are you worried that the additional burden on supermarkets will actually lead, through greater compliance costs, to greater costs at the till?
CHRIS BOWEN:
Sure, let me deal with that in two parts. Firstly, what is unit pricing? When you're at the supermarket and you're doing your shopping, often you've got a couple of kids in tow, as I can attest to, you don't have time to sit there and work out – well this one's 475 grams and this one's 910 grams so which one's the best value, it's very confusing.
Unit pricing will reduce the price to the total price and a price per gram or per litre, or whatever is the relevant unit of measurement in that particular case and you'll be able to compare them much more easily. There have been independent reports to show that that does help, the ACCC doesn't put a figure on it but it certainly would give consumers more information if they choose to use that service.
Now on compliance costs, a number of the submissions Woolworths sent to the inquiry, for example, that if implemented over a period of time, providing we didn't tell them we didn't them they have to do it tomorrow, if implemented over a period of time they could do it for no cost because they'd do it as part of their general refurbishment and their general upgrading of their facilities.
KIERAN GILBERT:
What about the smaller providers, what about the smaller grocery providers?
CHRIS BOWEN:
That's something that we'll need to work through the industry with over the coming weeks. I want to ensure that we have a flexible and light-handed system which doesn't impose unfair burdens on smaller providers who would have increased compliance costs as a percentage.
The ACCC has recommended that it apply to 'significant supermarkets'. They haven't recommended an exact cut-off point, that's what I'll have to work through.
So we do need to minimise the impact on smaller retailers, but also we need to ensure fairness and competitive neutrality and that one retailer isn't disadvantaged against another. So I'm not going to force one to do it without forcing another to do it, without very good cause. There are some things to work through there, which the ACCC has left open and they specifically say, the Government needs to work through those issues with the industry and that's what I'll be doing in the coming weeks.
KIERAN GILBERT:
It sounds like there's a bit of work to do on that front. When would you like to see this unit pricing enforced and in our supermarkets around Australia?
CHRIS BOWEN:
Well the ACCC has suggested a time-frame of around 12 months; again, I need to work that through with industry. We need to see it in sooner, rather than later, but I'm not going to rush it in and get it wrong or to impose unnecessary burdens on business which will then be passed on so, as I say, we need a light-handed and flexible approach and I need to work with the sector and with consumer groups who are very interested in this to ensure we strike that right balance.
KIERAN GILBERT:
Minister, what about in relation to the other thing you mentioned, the website GROCERYchoice, what's your message to those Australians who don't have access to the internet, I'm thinking a number of – many pensioners around Australia and others who don't have access to the internet.
CHRIS BOWEN:
We'll be working with the ACCC to make sure that information's available if people wish to ring the ACCC Info centre.
Look, on the website, it's guide for people. People will make their own decisions based on customer service, convenience, quality.
The ACCC's done a lot of work to make sure that only goods that are like for like are compared, that we're not comparing goods that are of different quality. Consumers, at the end of the day, will make their own decisions. But, for example, in the 61 regions that we're putting on the website across the country, in 52 of them, this month, Coles is the cheapest. That will move around. And Aldi, in the categories that we can compare Aldi to because they have a different product range, but in those categories they are significantly cheaper than other retailers.
People, myself included, get into a habit. You tend to shop at the same supermarket all the time because it gets convenient and you get into the habit of going to that supermarket. The website will give people a bit more information to say well if you're worried about grocery prices and you're thinking of changing in your region, it wont be supermarket by supermarket, it will be in a region which vary in size depending on the area; these are the sorts of savings that you can reach across the different baskets in the supermarkets.
So it will be an information tool, much like the other information tools that the ACCC has on their website at the moment providing people with information about warranties and scams et cetera. It's another information tool for people.
KIERAN GILBERT:
I'm looking at the recommendations that the Government is going to adopt as a matter of urgency; looking at state and local zoning and planning laws and the unit pricing scheme and the other elements that you're going to move on urgently.
To me it seems like there's going to be no immediate effect Minister, are you concerned that people that are hurting at the hip pocket today, aren't going to see any immediate effect from the Governments response to this grocery inquiry?
CHRIS BOWEN:
Well, look we said before the election that this is all about competition and about putting downward pressure on prices over time, through more competition. We said before the election there's no guarantee that any of the prices will come down at any particular point in time.
We have a range of mechanisms in place – the family relief package in the Budget, which was providing relief to people now. Of course over time we need to do what we can to encourage more competition in the grocery market. The ACCC recognises planning as a major impediment to new entrants coming in.
We all benefit from more competition Kieran, when a new supermarket opens up in an area, you don't have to shop at that supermarket to benefit because the competition it creates with the existing supermarkets means we're all better off.
So we need to be doing everything we can at all the different levels of Government to encourage more competition and the ACCC's report goes to the heart of that.
KIERAN GILBERT:
You say it's all about competition, but the ACCC assessment is that roughly one twentieth of the increases, at the most, roughly, one twentieth of the increases in food prices over the last five years can be directly attributable to the increase in gross margins, achieved by the major grocery players. So it seems that the competition factor is minimal at best.
CHRIS BOWEN:
They do find that, but they also find that there would be benefits to consumers; I think they use the term 'significant benefits' if there were more entrants into the market and more competition.
Now encouraging more competition is not an easy thing. There are a range of obstacles where a relatively small market in international terms for major supermarkets to consider opening up in our market at some cost. But we need to ensure that the policy settings are in place so that we are encouraging more competition, or indeed that the policy setting aren't discouraging competition as in some cases they are at the moment.
KIERAN GILBERT:
Assistant Treasurer Chris Bowen, as always thanks very much for your time.