GARY ADSHEAD:
Dr Andrew Leigh, Assistant Minister for Competition, joins me on the line now. Thanks very much for your time, Andrew.
ANDREW LEIGH:
Pleasure Gary, great to be with you.
ADSHEAD:
All right, I said it. They’ve been in under the gun. I mean, we now know that the ACCC are considering Coles and Woolworths to be part of an oligopoly. Can you tell us why that shouldn’t be of concern?
LEIGH:
Well, we do have a very concentrated supermarket sector, Gary. The report finds that 67 per cent of the market is controlled by Coles and Woolies, with ALDI having another 9 per cent. That’s more concentrated than many other countries in the world, which is why our supermarkets deserve an extra level of scrutiny compared with other sectors in the economy. This week we’ve announced the second round of the CHOICE grocery price monitoring, providing consumers information about where to get the best deal. The mandatory code of conduct has come out in exposure draft form, regulating the relationship between supermarkets and their suppliers. And now we’ve got this important report out from the ACCC looking at a range of competition issues in the supermarket space. We want to make sure that farmers and families get a fair deal. And holding the supermarkets to account is critical for the Albanese government.
ADSHEAD:
If they’re an oligopoly, can you live with that? Because you know that the nationals and others have been arguing that it’s time to break up their power base, the Coles and Woolworths power base, and if they’re classed as that and that gives them that ability to manipulate and control pricing, is it something that you would look at now? I know that you’ve sort of shied away from divestiture at this stage, but would you look at it now?
LEIGH:
Well, it’s not just me that’s been sceptical of this. Every major competition review going back a couple of decades – the Dawson review, the Harper Review, the Hilmer Review – have all recommended against divestiture. The National Farmers Federation don’t support it and the ACTU hasn’t backed it. It’s an approach which is rarely used in other countries. I don’t think you can point around the world to countries that are routinely breaking up their supermarkets. What has been recommended is merger reform, National Competition Policy and a mandatory code of conduct. And that’s what we’re getting on and doing. Measures that are practical, deliverable and make a difference for Australians.
ADSHEAD:
Do you think? I know that one of the comments that’s come out of this is that the community has lost trust in its supermarkets. Would you go that far?
LEIGH:
Yeah, I think that’s a fair comment. The allegations the ACCC has made this week against Coles and Woolworths, that they misled consumers about the nature of specials. If they’re proven, they’re very serious allegations. You take an example of a pack of Oreos where in one example Woolies was selling them for $3.50 for over a year, then just for a couple of weeks spiked the price up to $5, then dropped it down to $4.50 and advertised it as ‘price dropped’. The allegation the ACCC is making is that that sort of behaviour happened with more than 500 products accounting for millions of dollars of sales. So, these are really concerning allegations. They’ll be, of course, tested in the courts, but if they’re proven, then they will affect the reputation of those big supermarket chains.
ADSHEAD:
And of course, you know, the issue is how hard is it for others to get into this particular sector, into this particular market. One of the things have been pointed out is the way that the giant supermarkets and the companies behind them tend to ‘land bank’. They keep parcels of land without developing them, primarily to stop competition. What do you think of that?
LEIGH:
Yeah, if it’s occurring, it’s a real issue, Gary. It’s something that’s within the remit of states and territories who control the planning and zoning laws. And one of the reasons we’re working so hard on National Competition Policy is because issues like this do cross the federal‑state divide. It’s vital that states and territories are keeping an eye on potential misconduct when it comes to land banking. The ACCC’s report today identifies more than 100 sites being held by Coles and Woolworths. And ensuring that they’re developing them in a timely fashion or giving them back to the market is really important.
ADSHEAD:
The other issue, of course, is the CHOICE quarterly report, which of course your government asked CHOICE to look at in terms of where pricing was at overall, when you look at a basket of groceries. Now, yesterday we discovered that ALDI comes in a lot cheaper than Woolworths and Coles. You know, for example, I think the figure that they’ve come up with is $50.79 for the same level of produce, compared to $68 for Woolworths and $69 for Coles. What do you think of that?
LEIGH:
It’s important that we get the information to the hands of consumers and so people know where to shop. People might have had a gut sense that maybe ALDI was cheaper, but they might not have known ALDI was 25 per cent cheaper. And getting these reports out on a regular basis puts competitive pressure on the supermarkets to do better each time. The basket with specials favoured Woolworths the first time we did the report. This time it favours Coles, with the basket being about $2 cheaper in Western Australia at Coles than Woolworths. So, that is an important part of what we’re doing, getting information into the hands of consumers and ensuring that people can get the very best deal. Now, one of the things the interim report finds today is that the average ALDI is located just 400 metres from Coles and Woolies. So, that does facilitate the ability of people to do some of their shopping at ALDI and some of it at Coles and Woolies.
ADSHEAD:
Can I ask you about one issue that's come out of it? And that is that it appears that in Western Australia we get hit by about another dollar on your average shop through the supermarkets. Do you have a view on that? I mean, is that just a geographical thing that, you know, we're the mining and resources capital so we can be charged more? What do you think?
LEIGH:
No, I think it is. The figures you quoted before were the national averages for those baskets. But as you say, if you look at just Western Australia, ALDI’s at $51, Coles at $67, Woolies at $69, which is a bit higher than you see on the east coast. It’s up to the supermarkets to explain what’s going on there and whether that’s simply to do with transport costs. But we want to make sure that all Australians are getting a fair deal.
ADSHEAD:
All right. Is there any possibility that the supermarkets, and I’m play devil’s advocate here, have become a bit of a sort of a whipping boy for government all around cost of living? Let’s look at some other organisations, some other companies to blame.
LEIGH:
We need to make sure we’ve got more competition right across the Australian economy. Gary, we’re talking a lot about supermarkets this week, but that’s in the broader context of our competition reforms. We’re doing the biggest merger shake up in 50 years, getting the merger laws fit for purpose, for a modern economy. This means that the mergers that need to go through, go through quicker, and those that need scrutiny get better attention. We’re looking at non‑compete clauses which impede about one in 5 workers from moving to a better job. And the National Competition Policy revamp is really the first time it’s happened since the 1990s. And we look back to that 1990s National Competition Policy as a vital way of spurring productivity. There’s too many industries in Australia dominated by just a handful of firms, and that’s not good for the economy, not good for workers or consumers.
ADSHEAD:
Just before I let you go, obviously, you know, one of the big questions this week is whether or not your government is looking to change the negative gearing setup. Are you someone who would like to see negative gearing altered in Australia?
LEIGH:
Well, we’ve got a big and ambitious housing agenda and negative gearing is not part of that. What we want to do is focus on building more homes. Our focus is not on changing the tax settings. We’re rolling out more homes through the Housing Australia Future Fund. We could do more yet if the Coalition would support build to rent, which is basically a system that creates residential apartments with same sort of developers that are building business towers. We just need to get more housing supply out there. And the target of 1.2 million homes over the next 5 years would bring us up closer to the advanced country average, where Australia, compared to other advanced countries, tends to have less homes per person than they do.
ADSHEAD:
But why won’t the Prime Minister just knock it on the head? Because it’s clear that he doesn’t dispute that Treasury are looking at the negative gearing tax model.
LEIGH:
Well, he’s just made the point that Treasury looks at a range of different issues and that he wants public servants to be thinking about policy across a host of issues. But I think he’s been pretty clear that this is not something that’s front of mind for us. Our real focus is on building.
ADSHEAD:
And do Treasury officials do that without sort of direction from anyone in government to look at negative gearing as a possibility?
LEIGH:
Oh, absolutely. The Treasury Department, along with other agencies, is full of brilliant, thoughtful people who are thinking about how to make the country better. They’re not just taking direction from on high, they’re thoughtfully engaging across a host of areas. I’ve talked before about the Competition Taskforce, which is a powerhouse of ideas. You’re seeing a lot of that under the Albanese government, a real welcoming of the role of public servants in making the country better.
ADSHEAD:
So, you’d say to anyone that might be considering an investment home, not to be concerned at all that after or before this election, there could be changes to the negative gearing structure.
LEIGH:
Look, when it comes to tax, our focus is on multinational tax, where we’ve been tightening up loopholes and making sure there’s more transparency. We’ve made considerable changes to ensure that the multinational tax system is fairer. The global minimum tax, closing off some of those debt deduction loopholes, that’s been what we’re our main focus in the tax reform space. As well, of course, ensuring that all Australian taxpayers got a tax cut from the 1 July.
ADSHEAD:
It seems to be the wording, I think, of all this. But from what you understand, you would rule that out from your government, any changes to negative gearing tax?
LEIGH:
It’s absolutely not something we’re considering. The focus on what we’re doing with housing is on building more. We could do even more of that if the Liberal‑Green coalition in the Senate would stop blocking and let us start building.
ADSHEAD:
All right, Andrew Leigh, thanks very much for joining us. Appreciate your time.
LEIGH:
Always a pleasure, Gary. Thank you.