ANDY PARK:
The cost of living is rising, interest rates are going up, groceries are getting more expensive, and it's getting harder to travel with the rising price of airfares. None of this is news to you, but in recent weeks we have heard stories of people who are really struggling, which are in stark contrast to some of the eye boggling profits from some of Australia's largest companies and their reporting. So what can we do? What should we do to ease the pressure on the average Australian household? Andrew Leigh is the Assistant Minister for Competition, he joins me now on RN Drive. Good day, Andrew
ANDREW LEIGH:
Great to be with you.
PARK:
You've spoken about market concentration allowing companies to lift profits excessively and keep wages low. Are Australian consumers and workers being rorted here?
LEIGH:
We certainly know that excess monopoly power is bad for consumers. It drives up prices and drives down choice. It means that firms don't do as much research and development and you don't get the sort of innovation that you'd expect in a highly competitive economy. But what I'm increasingly concerned about now is that market concentration might also hurt workers too. The classic extreme is a company town where you've only got one choice as to who to work with. In that situation, you have the employer exerting a sort of power over the workers that a monopoly exerts over consumers. And this monopsony power, the power that employers have over workers, seems to be prevalent in a lot of parts of Australia, particularly regional Australia. That might be a reason why we haven't seen the sort of real wage growth we would have hoped over the last decade.
PARK:
Yeah, this word monopsony has come up recently in the book Choke Point Capitalism, pointing at companies like Amazon or Disney or Netflix. It's something that a lot of markets, I think, are assessing. But here in Australia, we clearly need more competition. How do we do that from a practical standpoint?
LEIGH:
Well, one of the things that troubles me is the prevalence of non-compete clauses. These are clauses that basically say that workers can't go to a competing firm for a period of time after they finish with their employer. You might think that that's reasonable if you're dealing with high-tech workers with a lot of information in their heads. But I've been told that they also exist in contracts for early childhood workers working on the minimum wage. If you stop workers from moving to other employers, then invariably you're going to reduce their choice and drive down their wages. And so those noncompete clauses may be a problem. In the US, the Federal Trade Commission has proposed a nationwide ban on non-compete clauses. So I've asked the competition watchdog and Treasury for advice as to what we might do here.
PARK:
So when can the public expect details on the ACCC's look into this? Surely the longer it goes, the worse people could be off in terms of the economy, in terms of cost of living.
LEIGH:
I'm hoping to hear back from them within weeks rather than months. But we're at the beginning of a conversation over employer power here. It really hasn't been on people's radar, despite the fact that in economics, it has a long history, going back 90 years to the great Cambridge economist Joan Robinson. The discussion around how market power might hurt workers is in its infancy. And the reason that I did this speech at Per Capita today was to shine a spotlight on new research by Jonathan Hambur that's out in the public domain now, which really points to the way in which wages may not have grown as rapidly because workers don't have the choices that they should have.
PARK:
With respect, Andrew Leigh, what can be done in the meantime? These sound like big structural kinds of regulatory type changes, or a vision, if you like, but the average Australian listening to this now is going, “Well, I don't know how I'm going to pay, the rent, I don't know how I'm going to pay for food”. These are the most pressing issues. It's hard to sort of give them that structural change when tomorrow seems uncertain.
LEIGH:
Yeah, great question. I mean, since coming to power just a matter of nine months ago, we have banned unfair contract terms and raised the penalties on anti‑competitive conduct. We've asked the competition watchdog to look into anti‑competitive conduct in digital platform services and we're currently consulting on whether we need platform-specific regulation and a ban on unfair trading practices. We're moving on this because we recognise that competition reform is at the heart of a dynamic economy. One of the reasons why we saw rapid productivity growth in the 1990s were those Hilmer-Keating productivity reforms that put about $5,000 a year into the pockets of the typical Australian household. Competition reform is at its heart about making sure that workers have lots of choices and consumers have plenty of choices. That gives us the sort of economy that encourages new firms to come in and challenge the big incumbents. And yet, when you look at the Australian share market, the biggest five firms now, well, four of them were top five in the mid-1980s. It's a pretty stultified economy at the very top, and more economic dynamism would be good for everyone.
PARK:
And, Andrew, the federal government superannuation changes coming into effect, what, from the middle of 2025 meant that people with super balances over 3 million will be more taxed by, what, 30 per cent instead of 15 per cent? The Opposition says Labor's claims that this change impacts a small percentage of people are misleading because the $3 million cap won't be indexed. Is that a fair criticism?
LEIGH:
Look, this is affecting a tiny proportion of Australian superannuants. That's the top 0.5 per cent - one in 200 superannuants.
PARK:
But isn't the opposition's point that it will affect increasingly more people? If this indexing argument stacks up?
LEIGH:
Well, you know, clearly it will have a slightly larger impact over time, but it's still going to be on a very small share of people. And let's remember what sort of tax break people with who have more than $3 million in super are getting. It is a tax break which in most investment return years is going to be bigger than the full rate age pension. So the question is: do we continue this way, providing tax breaks bigger than the full rate pension to a very small number of Australians? Or do we make this modest change that doesn't affect anyone's balance, doesn't come in until 2025, still provides concessional earnings rates on superannuation - in order to make the system a bit more sustainable? Labor created super in the early 1990s. We've always fought for increases in the universal contribution rate because we want superannuation to work. We were really worried when the Morrison government let $30 billion slip out of super during the pandemic. We want to ensure the system is sustainable and that it works for everyone.
PARK:
And Shadow Treasurer Angus Taylor was on RN Drive with me yesterday. He says it amounts to a broken promise. Your response?
LEIGH:
Look, we've said very clearly we weren't making major changes to superannuation. This isn't in the character of a major change. This is simply a sensible tweak to the system. It's smaller than the changes that the former Coalition government made in 2016. And indeed, Angus Taylor a couple of years ago was telling us that multimillion-dollar super accounts shouldn't be exempt from tax reform. He seems to have changed his tune now that it's politically convenient for him.
PARK:
Assistant Minister for Competition, Andrew Leigh. Thanks for joining me this afternoon.