SUBJECTS: ACCC Grocery Inquiry
CHRIS BOWEN:
Good afternoon. The ACCC's report into grocery prices in Australia. This is a very comprehensive report. It's 642 pages long. It follows six months of work by a dedicated unit within the ACCC. Two hundred and sixty three submissions. Twenty two days of public hearings. This report concludes that the grocery market in Australia is workably competitive. However, the ACCC finds that there are a number of actions that can be taken to improve the level of competition in the Australian grocery market.
And they also find a number of impediments to the expansion and entry of new entrants to provide more competition in the Australian retail grocery market, including high barriers to entry and expansion - particularly in relation to planning laws and the attainment of new sites, limited incentives for Coles and Woolworths to compete aggressively on prices, and limited price competition to the major supermarket chains from the independent sector.
In other words, the ACCC finds that while the grocery market is workably competitive, consumers would benefit from it being more vigorously competitive. Importantly, the report confirms that factors other than the lack of competition have been responsible for the vast majority of the increase in grocery prices in Australia over the last five years. However, the report finds - and I quote – “Australian consumers would significantly benefit if Coles and Woolworths faced more competitive threats that encouraged more aggressive pricing strategies”. Also, the report finds that although the major supermarket chains, Coles and Woolworths, do compete on price, that competition is not as vigorous as it could be.
The report also finds that the entry of Aldi into the eastern states some years ago has provided a substantial and beneficial impact on competition, and benefits to consumers.
The report finds a number of barriers to new entrants entering and expanding in the Australian retail grocery market. The report finds that planning systems give existing players the ability to game the system and to keep other players out of their markets. The report also finds that existing players use that potential to game the system and to make planning objections when in fact no legitimate objection exists other than their own commercial interests.
The report calls on all levels of government to take necessary action to ensure that the planning systems in Australia have due recognition of the competition impacts.
Planning harmonisation is already on the COAG agenda. And I'm writing to the Prime Minister to request that that COAG process also take into account the concerns that the ACCC have identified in this report.
In relation to other restrictions on competition, the ACCC found a significant number of restrictive covenants in leases existed, giving incumbent supermarkets the rights to continue effectively as monopolist supermarkets in those shopping centres.
These provisions are already prohibited under part four of the Trade Practices Act if they had the purpose or effect of substantially reducing competition. The ACCC will now review all the cases brought to its attention in this inquiry and take appropriate action under the Trade Practices Act where it feels it is warranted. Independent supermarkets who feel they are excluded from a shopping centre by one of these leases should contact the ACCC.
The ACCC finds that although the acquisition of individual stores by major chains has not had a major impact on competition, they continue to support being given enhanced and clarified powers to regulate creeping acquisitions. We have an election commitment to introduce this enhanced and clarified power, and I can confirm our intention to do so.
A discussion paper on what form that regulation should take, what form the legislation should take, will be issued shortly, and we will legislate as soon as possible after that.
The report recommends a series of changes to the horticultural code to assist farmers in their negotiations with retailers. The Minister for Agriculture and I have agreed that, as recommended by the ACCC, he will refer these proposals to the Horticultural Code Committee. Finally, the ACCC examined the issue of transparency and prices, and recommended a mandatory, uniform, and nationally consistent unit pricing regime. A number of independent studies have found substantial savings for consumers by unit pricing. The ACCC finds that on balance, unit pricing will deliver benefits for consumers, especially if supermarkets are given the time to implement this system, thus minimising any compliance costs.
The Government views unit pricing very sympathetically, and recognises the real benefits to consumers. As a consumer, I know, when you're doing the shopping - often with a couple of kids in tow - it's very hard to work out the different value of different goods, particularly when you've got unusual weights and usual pricing mechanisms, comparing 415 grams to 375 grams, when you're trying to do the weekly shop is very difficult.
Unit pricing will reduce those prices to a per gram or per litre relative value, depending on the appropriate value for the good. It's important, of course, that we weigh up the compliance costs for small business, and in coming weeks, I'll be consulting closely with consumer groups and with the sector to assess the best way of implementing unit pricing, and the best way to minimise the compliance costs on small business, in particular, and the best cut off point to ensure that the smallest enterprises in the country aren't unnecessarily burdened by compliance costs.
On 11 July last year, the then leader of the Opposition announced that a Labor Government would establish a website to give consumers more information about which supermarkets in their region are cheapest on a range of goods. The GROCERYchoice website will be operational from tomorrow. It will provide a monthly snapshot of grocery prices in 61 regions across the country. It will provide information on goods in eight different baskets - meat and seafood, fruit and vegetables, dairy, bread and cereals, drinks and snacks, general groceries, household and personal care; and basic staples basket to allow comparisons with Aldi, who do not have a wide enough range of goods to be compared with the other retailers on the different baskets.
The ACCC has undertaken considerable work to ensure that only like for like goods are used for comparison purposes for these baskets. The goods in the baskets will change from month to month, and be kept confidential to ensure supermarkets can not manipulate prices to artificially reduce their prices in that basket while putting up prices on other goods.
We'll consult with consumer and industry groups once the website has been operational for some months to ensure that it's providing maximum value for consumers and to make any enhancements that may be necessary after it's been up and running. There are some interesting facts to come out of the first month of surveys. For example, in 52 of the 61 regions surveyed, Coles is the cheapest of the major supermarkets. Aldi are present in 40 of the 61 regions. In each of the regions, they are the cheapest in relation to their general staples. The difference compared to the next cheapest in each region is up to $19 or 25 per cent. By way of example, in south western Sydney, where I live and shop, the difference between the most expensive supermarket and Aldi on general staples is $19.49. So people will be able to compare quality, customer service and convenience when they go to those shopping centres.
But this will provide a useful guide for people looking to where to find better value for money. And when you combine it with unit pricing, you do find greater transparency and information in grocery prices.
Before I hand over to Mr Samuel, who'll make a few brief remarks before we take questions, can I say, the Government's under no illusion that introducing more competition into the grocery market will be easy. But the ACCC has identified significant benefits for consumers for more vigorous competition. So I look forward to working with the ACCC and other agencies and other levels of government to ensure that the grocery market in Australia is as competitive and as vigorous as it can be, because consumers will be the beneficiaries.
Mr Samuel.
GRAEME SAMUEL:
Thanks Minister. Well this inquiry was the second inquiry conducted by the ACCC under Part 7(a) of the Trade Practices Act. The inquiry has allowed the ACCC to sift through a huge amount of information and data including internal documents obtained from the major players.
We held hearings around Australia and undertook to provide a rigorous analysis in a public setting of all elements of the grocery supply chain in Australia. Our aim was to run a transparent process that would enable all Australians to be better informed about the industry, pricing practices and why prices have risen.
Well let me now turn to the key findings. Food prices in Australia have risen significantly but only a small part of this can be blamed on any lack of competition. As detailed in chapter six, the gross margins Coles, Woolworths and Metcash achieved in their grocery businesses increased over the last five years by between 0.2 and 1.6 per cent.
The ACCC estimates that even if these increased gross margins were solely derived from increased prices paid by consumers then they would only account for an increase in retail grocery prices of around 0.8 to 1.0 per cent over the past five years. This compares to the total actual increase in food prices of 21 per cent over that five year period.
Now that's not to imply that gross margin increases have in fact been the result of weakening price competition. There are other possible reasons for improved margins beyond increased prices such as improvements in the efficiency of operations.
It is simply saying that there is little evidence of any weakening of price competition in grocery retailing and wholesaling has played a significant role in explaining recent increases in food price inflation.
Our inquiry found that overall the grocery market is, as the Minister has said, workably competitive. That term is used to describe a market in which competition exists but it is definitely not as competitive as it should be. In a working competitive market there is sufficient competition to protect consumers from monopolistic practises but there is a lack of the type of strong and vigorous competition that means consumers are getting the best deal possible.
Being workably competitive means that Coles, Woolworths and Metcash have little incentive to destroy the current balance through vigorous price competition. Some of the impediments to more vigorous competition are, first, high barriers to entry due to difficulties new or expanding players have in finding new sites. The behaviour of Coles and Woolworths with their restrictive agreements at shopping centres and gaming of planning objection processes has increased these barriers.
Secondly, we found limited incentives for Coles and Woolworths to alter the existing competitive balance through aggressive price competition.
Finally, we found that there is limited price competition from the independent supermarkets. Many independent supermarkets compete on factors other than price such as convenience, which is fine. However for those independents that want to compete on price the wholesale price at which they can buy packaged groceries is a significant factor holding them back.
Metcash's position as the only grocery wholesaler to these supermarkets weakens the competitive threat that the independents can impose in the grocery industry.
Turning to the supply chain, we've not found anything wrong across the board with the grocery supply chain. Farm gate prices typically reflect competitive market conditions for each particular commodity. We have evidence that often Coles and Woolworths are tough to deal with, but there is no across the board evidence to indicate that there are significant structural problems in the supply chain.
The ACCC has made recommendations to Government in three areas; the first is in relation to planning laws. We've recommended that all appropriate levels of government consider ways in which zoning and planning laws can be adjusted so that the contribution to competition through having a new supermarket player can be taken into consideration.
The second area of recommendation is in relation to the Horticulture Code. The code has only been in place a short time and is a big cultural change for the horticulture industry. It's too early to rule on its effect, however the ACCC considers there are areas such as extending the code to retailers where it could be improved.
Finally the ACCC has recommended the introduction of mandatory unit pricing for all significant supermarkets. Unit pricing will assist consumers in comparing prices and will add to the competitive tension between different products and between supermarkets.
While the Government will consider these recommendations the ACCC is also going to be active in chasing up several issues that have come out of this inquiry. In particular we'll be looking at agreements and arrangements that Metcash has with independent supermarkets and suppliers to see if these place restrictions that may be in breach of Part 4 of the Trade Practices Act.
We'll also be taking a close look at restrictive agreements and leases. Up until the grocery inquiry we had not heard many complaints about these, but the grocery inquiry has prompted industry participants to complain, and the ACCC will be closely considering all issues on particular leases under Part 4 of the Trade Practices Act.
Another area of focus will be acquisitions. There are some that seem to think that the ACCC will only look at acquisitions of existing supermarket businesses. That's not the case. The ACCC can and has investigated site acquisitions and leases, and will continue to do so.
Finally, on the GROCERYchoice website. One thing that became clear during the grocery inquiry is that with the thousands of products available in supermarkets it's hard for consumers to compare them all to decide which supermarket chain is cheapest overall.
We heard evidence from supermarket executives during the inquiry that they only permit their store managers to reduce prices to meet local competition on a limited range of what are known as 'known value items'. That is those which they think consumers might remember the price of elsewhere.
We heard evidence that supermarket chains concentrate on advertising reduced prices on a few 'specials' to bring people in the door. The difficulty that consumers have in comparing supermarket chains' overall price weakens the competitive tension between the leading supermarket chains.
So to give consumers more information to make informed choices and promote more vigorous competition between the supermarket chains the Government has instructed the ACCC to conduct a monthly national survey of supermarket chains' prices.
We're surveying the prices of 500 items at supermarkets across Australia, we've had more than 600 price collectors in the field. We will publish prices for typical baskets of products such as those that the Minister has outlined so that the Australian consumer can see which supermarket chain is cheapest overall in their area.
It won't duplicate supermarket advertising; it won't publish the weekly specials; it won't list grocery prices for individual supermarkets. But this is about giving consumers something new that the supermarket chains won't tell them: who is cheapest in each region overall. The ACCC will publish these basket prices on a dedicated website called GROCERYchoice that will be operational tomorrow morning.
Can I, in conclusion, thank the team at the ACCC that have worked assiduously on this inquiry over the past six months. They've done, if I might say so, an outstanding task. I hope that when you read the report you'll realise the rigour that has been undertaken by them in conducting this inquiry.
Can I also thank all those who put the 265 submissions to us, and the many executives and others that have stakeholder interest in this industry who have appeared through our 22 hearings throughout the country. They have all made their invaluable input to our deliberations.
Thank you.
CHRIS BOWEN:
Either of us would be happy to take some questions.
QUESTION:
[Indistinct] are Australians paying too much for their groceries or more than they should be?
CHRIS BOWEN:
Well I think the report highlights that better competition would provide better results for consumers. Now, the report also highlights that the majority of the food price increases over recent years have been [indistinct] to other factors. But it highlights areas for improvement and areas where consumers would benefit.
QUESTION:
[Inaudible]
GRAEME SAMUEL:
Competition is always the finest discipline in a market economy, and we have a market economy in Australia. If competition is meeting impediments - structural impediments to it properly applying to the discipline of competition applying, then it can affect us in terms of choice, in terms of the quality of what we're being offered, and in terms of price.
Now, we've identified that there are some structural impediments to competition. We've talked about workable competition, but competition that is not as vigorous, not as thorough, not as tough as we'd otherwise like to see. So to the extent that there are those impediments to tough, vigorous and rigorous competition, then that obviously has an impact upon the factors I've mentioned before price, convenience, choice of offering.
QUESTION:
[Inaudible question]
GRAEME SAMUEL:
Well, I'm not sure, Steve, what you mean by a classic duopoly. I think what we've indicated is that we're not only dealing with Coles and Woolies, but we're also dealing with the Metcash supplied independent supermarkets. We're dealing with Franklins in New South Wales and of course, we've got Aldi across at least the eastern seaboard and moving around Australia. So there are a number of participants in the marketplace.
But what we have indicated is that the level of competition while being workable, is not as rigorous as we'd otherwise like to see. Now through the inquiry, we've seen evidence given by senior executives at Coles, Woolworths, of the representatives of the independent supermarkets - the IGA through NARGA and the like - that what they engage in, it tends to be more price matching rather than any form of aggressive price discounting. And that's the sort of issue I think that we need to see, need to deal with.
QUESTION:
[Inaudible question]
GRAEME SAMUEL:
No, look I don't think we can use that expression in anyway at all, Steve, because one of the things that we identified was that if you took the gross margins that have developed, say for example, over the past five years, and we applied those to increases in grocery prices, the contribution of any increase in gross margins for Coles, Woolworths and Metcash, is about one-twentieth - it's one per cent relative to the 21 per cent increase in grocery prices over that period of time.
Now if you just simply indicated that's the movement in the gross margin, we're not talking about enormous figures that would suggest to you that your commentary, which is ripping off, is an appropriate description.
QUESTION:
[Inaudible question]
GRAEME SAMUEL:
Yeah. John, this is a process that's occurred over a large number of years. And if you have a look at Appendix E in the report, you'll see the various determinations that were made back in the 1990s in relation to the consolidation of the wholesaling sector, assisted or otherwise, as you might want to describe it, by certain determinations of the Australian Competition Tribunal. And that's been analysed in some detail in Appendix E.
The sector became concentrated through the late - mid to late 1990s and very early 2000s in a way that has perhaps, in one - on one analysis, not serving as well at present. However, and this is the important - however, we need to recognise that in the grocery sector for an economy as large as Australia, 21 million people, there's a limited number of participants that can operate with the appropriate economies of scale.
And so therefore, if we're examining the potential for new entrants into the wholesaling sector, we need to look at two issues. The first is, what are the impediments that might exist at the moment, and I've addressed issues of potential impediments and agreements that exist between Metcash and some suppliers and its retail customers, the IGA Group. But also, we need to consider whether there are appropriate economies of scale that would now enable other participants to enter or to expand in the market in the areas of wholesaling.
Now, we have seen a movement in that direction with respect to Franklins. We've seen a movement in that direction with respect to Aldi. They are operating in a rather select area of the market in terms of staple goods, but yeah, I think we need to recognise that the Australian economy is of a size that can only permit certain participants to operate in the market.
There's a very interesting chart in there that I draw your attention to. I think it's chart 6.3, by memory. But it actually indicates the level of EBIT margins being earned by the Australian retailers relative to retailers overseas. Steve, this will focus on the question you raised as well. And while the EBIT margins of Woolworths are relatively high, and Coles is of course, significantly less for the reasons that are best expressed by the now chief executive of Coles, Ian McLeod, but I think we've already heard some views as to what's happening with that particular corporation.
But if you have a look, in the markets that are often quoted as the significantly less concentrated markets than Australia, that is the US and the United Kingdom, the EBIT margins being earned by companies such as Tesco or Wal-Mart are significantly higher than those being earned by our best performer in Australia, which is Woolworths.
QUESTION:
Mr Samuel, are farmers being exploited by supermarkets [inaudible question]…
GRAEME SAMUEL:
We've got two whole chapters dealing with buying power and the use of buying power. And while we've indicated in the report that all our examination suggests that the major supermarket chains are tough dealers, there is no evidence of exploitation.
Now, you recall that through this process, we've had a fair degree of public discussion about suggestions being put to us by representative groups, not only of farmers' federations, but of groups of various participants in the industry, such as beef associations and the like, of exploitation occurring. We have pleaded, we've exhorted, we've guaranteed absolute confidentiality if information can be given to us that specifically identifies exploitation and identifies those parties who may have been guilty of that particular conduct.
I'd have to say to you that we can find no systemic evidence, or no evidence of any systemic exploitation in that context, despite the various pleas and exhortations that we've made.
QUESTION:
[Inaudible question] Do you think that those kind of moves will actually make a difference to the householders' pockets?
CHRIS BOWEN:
Well, this is about putting downward pressure on prices over time, through increased competition. And that's what we've been talking about through this whole process, from before the elections through the inquiry and now. So what you need to do is ensure that the market is as vigorously competitive as possible. We asked the ACCC to examine the market, to see if it's as vigorously competitive as it can be. The report's come back that no, there is room for improvement.
Now, what you can't do is put an exact figure or an exact target, but you can say that we will do what we can to remove any barriers to entry or minimise those barriers to entry to ensure that we have as much competition as we possibly can do. That's the role of a government in a market society and that's what we'll do.
QUESTION:
[Inaudible question]
CHRIS BOWEN:
Well, it's appropriate that we have the ACCC's inquiry, which is looking at these matters. The matter of the retail report is a matter, not only for me, but for other Ministers in the Government - the Minister for Small Business, and others. And that's being examined through the Government processes.
QUESTION:
[Inaudible question]
CHRIS BOWEN:
It'll be released when - once the Government has worked through the issues. But this is a report into groceries more generally and which retail leases has come up as a specific issue. The Productivity Commission has made their findings, the ACCC have made their findings, and they will deal with them separately.
QUESTION:
[Inaudible question] … yet you talk about this idea of the classic duopoly, is still workably competitive. How competitive can a market share like that really be?
GRAEME SAMUEL:
Well, yeah the best signs of true competition will be to examine the sort of factors that I outlined before in my introduction, which is to examine the movement in gross margins, to examine the EBIT margins, to compare them worldwide.
Now as I say, most often, the US and the UK are quoted as examples of less concentrated, more competitively vigorous competitive environments. My recollection is - I'll have a look in a moment - but my recollection is that Wal-Mart in the US is earning an EBIT margin that's something in excess of seven per cent. That compares with something just under six per cent that's being earned by Woolworths, and Woolworths would themselves proclaim that they are sitting out there in the higher echelons. Tesco is earning an EBIT margin in the UK, in excess of six per cent.
Now that would suggest that the EBIT margins, which are very important indicators of ability to earn profits, both for efficiency and through ability to charge prices, that those EBIT margins are sitting at healthy levels, but not at - to use Steve Lewis' terms, at rip-off levels.
I might note, by the way, that one of the elements that we have to consider in the Australian market is the fact that by their own self confession if you like, Coles have indicated that they have not been operating as vigorously efficient as they would otherwise like to see. And that may, itself, have its own impact on competition.
QUESTION:
Mr Bowen, in the lead up to the election, Labor made a very big promise to the Australian people that it would implement measures, to put downward pressure on grocery prices [indistinct]
Do you think you kept faith with that election promise in this report? Is there anything in this report, or in the recommendations, that you can point to as the Minister responsible, that [indistinct] consumer's heart that they will see downward pressure on grocery prices?
CHRIS BOWEN:
Well you look at the context of the last election, Mr Howard said Australian working families have never been better off and we respectfully disagreed.
We pointed out that there were issues in relation to grocery prices and we said we'll do a couple of things. We'll have a website to help you find the cheapest grocery prices that you can possibly do. We said, in the same announcement, that we'd task the ACCC with the role of ensuring the market was as competitive as it could be.
Now both the now Prime Minister and the now Treasurer who were asked, on several occasions, can you guarantee that you will bring grocery prices down. The response was, no, I cannot guarantee that. The then Treasurer, Mr Costello, ran around saying, pointing out, that Labor would not guarantee any reduction in grocery prices and that what we were doing was promising that we would ensure that the market was as competitively vigorous as possible. And that's exactly what we're doing.
We're implementing the election commitment of a website. We've implemented the election commitment of a Grocery Inquiry and we're implementing the recommendations of that Grocery Inquiry.
QUESTION:
[Inaudible question]
CHRIS BOWEN:
I'll make the same guarantee that the Prime Minister [indistinct] the market is vigorous as it can be.
QUESTION:
[Inaudible question]
CHRIS BOWEN:
We cannot guarantee that grocery prices will come down, because the biggest impact on grocery prices is those international factors, as the report outlines.
What we can guarantee the Australian people after the election, as we did before the election, is we will take every action possible to ensure that the market is as rigorous as it possibly can be.
QUESTION:
[Inaudible question]
CHRIS BOWEN:
Look, those are issues that we'll work through as I say, both for the industry and with consumer groups and with the Treasury and the ACCC. There will need to be, as you say, penalties for not complying. But there will also need to be a flexible, light handed approach to ensure that business can implement this in a way that minimises their own compliance costs.
There's - as the ACCC has said themselves in this report, there's a bit of work left to do, to ensure that we get that balance right. I'm very conscious of ensuring that we don't burden small business with costs. But I'm also very conscious, I must say, of ensuring competitive neutrality between the major supermarket players and others and not giving one sector of the market an unfair advantage over the others. These are issues I need to work through over the coming weeks.
QUESTION:
[Inaudible question]
CHRIS BOWEN:
Well absolutely. Of course, there will need to be an enforcement regime. If you're going to have a mandatory system, there needs to be some sort of price to pay if you don't implement that mandatory system. But these are issues that we work through with the ACCC.
QUESTION:
[Indistinct] spoken to, about your own personal experience in retail prices. But to actually go onto a website and to choose your location. I grew up in Mornington Peninsula and having a look at the site, this area is huge. There's an [indistinct] but there isn't one in Frankston. So the people in Frankston aren't going to drive there. They're going to go to their local Coles and Safeway.
CHRIS BOWEN:
Sure.
QUESTION:
And you spoke of [indistinct] saying about how it's not going to be particular stores that are listed on this website. How's that going to work?
CHRIS BOWEN:
Well what it does is give people a guide to say, well in our region Aldi, for example, is significantly cheaper. So people get into a habit. I'm no different and I'm sure people in this room are no different. You get into a habit. You go to the same supermarket, time and time again and you notice prices going up and you think that's not good.
But it's not a spur for you often to look around, to search for cheaper prices. And if you do, you may get there and find that the prices are no different. So this is a guide for people to say, well in your region, if you choose to have a look at Woolworths, or Coles, or Aldi, or independents, whatever the case may be in that region, you may find a difference in prices. And then those people, as they should in a market economy, can make their own choices based on convenience, customer service quality, et cetera.
QUESTION: [Inaudible question]
CHRIS BOWEN:
Well that's a matter for them. That's the type of economy we live in. Some people will pay more, for more convenient locations. Other people will choose to drive a bit further to get substantially cheaper groceries. That's how the system works, as it should.
QUESTION:
[Inaudible question]
CHRIS BOWEN:
Well as I say, it's a guide to people. It's a snapshot, so people will log on and see, in that month, which grocery store is cheaper.
Can I say I expect there will be considerable public comment on the first business day of each month, from your good selves, when these are released on a monthly basis, as to which is the cheapest supermarket across the country, and that will increase pricing transparency as well. So it does have that impact as well.
QUESTION:
[Inaudible question]
CHRIS BOWEN:
Well I think the ACCC has made a series of worthy recommendations in relation to the Horticultural Code. I must say the Horticultural Code is primarily the responsibly of the Minister of Agriculture. It's not an area that I confess to be an expert on.
But these are, as I understand it, changes which many people in agricultural sector have called for. It is a controversial area, the Horticultural Code. And that's why it's appropriate that the ACCC have recommended the reference to the Horticultural Committee. I have discussed it with the Minister of Agriculture, and he agrees with me that the best course of action is to refer it to that committee.
QUESTION:
[Indistinct] Can you clarify what has driven the bulk of that price rise?
GRAEME SAMUEL:
There's a range of factors Steve and I'll refer you specifically to the chapter in the report. But it's a range of factors that are both local and international.
There's been international rises in commodity prices. A number of the products that are sold off the farm here in Australia, are actually priced internationally because, for example, manufactured milk is operating in an international environment, and so will tend to be operating in an international market for the pricing of that particular product.
But we've seen those international factors driving commodity prices. We've also seen the impact of the drought in Australia, which has had a particularly adverse effect on prices in Australia.
Now they're all detailed there. But what I think is very easily able to be calculated, is the impact of increasing gross margins, with the emphasis on gross margins on the part of Metcash, Coles and Woolworths, and it turns out that it is about one per cent of that 21 per cent growth in supermarket prices over the past five years.
QUESTION:
[Indistinct] And why's Australia - Australia's food inflation increasing at a faster rate than other OECD nations?
GRAEME SAMUEL:
Well I think, as I say, we're impacted upon by some local factors, particularly the drought that has impacted upon us more significantly in Australia that it has elsewhere.
You'll see the exact detail of all this in the chapter in the report. I think it's chapter three if I'm not mistaken, but you'll pick that up in the report itself.
But it is instructive to actually be able to go behind the scenes and to actually try and determine what it is that's been causing the higher than other nation food inflation.
And I think it's important to note that while, as the Minister and I have said, we have workable competition in this country, it is not as vigorous as we would like it to be. There are elements that are preventing that competition from being as vigorous as we would otherwise like it to be. But the impact over the past five years has been about one per cent of the 21 per cent increase in food prices that we've seen occur.
QUESTION:
[Inaudible question]
CHRIS BOWEN:
There is some, as I say, some further work to be done in consultation. I think the ACCC talks about a timeline of about 12 months. Industry have pointed out that would minimise their compliance costs if they had about 12 months to implement it. I must say Aldi already has unit pricing. Woolworths has indicated that they are implementing unit pricing. I think Coles have started to go down that road as well.
But what we need to ensure it is a uniform system, so that there is one set of rules for everybody. There is a bit of work to do on that, but I think you could use 12 months as the guideline in terms of implementation date.
GRAEME SAMUEL:
Are there any other questions?
Thanks very much for your time.