SUBJECTS: Grocery Inquiry, Unit Pricing
LISA WILKINSON:
Well the long-awaited ACCC inquiry into grocery prices has called for significant reforms to the grocery industry and here's what will be introduced – mandatory unit pricing so that shoppers can easily compare from brand to brand, a new $13 million website called 'Grocery Choice'. That goes online today and will provide monthly comparisons of supermarkets and the report also found that consumers would benefit from more competition with figures showing that discount chain Aldi reduced overall grocery prices in the eastern states.
However, no evidence was found of exploitation by the big supermarkets and joining us now to talk about all of this and more, is Consumer Affairs Minister Chris Bowen.
Morning to you, thanks for your time.
CHRIS BOWEN:
Morning Lisa.
LISA WILKINSON:
Have we really learnt anything new from this inquiry? You said yourself that you are powerless in all of this and after six months what was the point?
CHRIS BOWEN:
Well I think the report, which is very comprehensive – it's 650 pages long; follows six months of work – points out the facts about the grocery industry and the facts are that the majority of the price increases over recent years have been due to the drought and international factors.
But the report does make the point very clear, as you say, that there could be significant benefits for consumers from more competition in the grocery market and some of the reforms that you mentioned. So it does say that most of the increases come from other factors, but you still can make a difference and you still can do more things to encourage more competition into the grocery market.
LISA WILKINSON:
Well the ACCC found the Australian grocery market is 'workably competitive', so what is driving up the price of groceries?
CHRIS BOWEN:
Well by workably competitive they said that it does work, but it could be a lot more vigorous, there could be a lot more competition. They've found that the majority of increases in grocery prices come from the drought, come from the world increased demand for food and from international factors.
So in the majority of increases, but they do say that competition could be a lot more vigorous in the Australian market.
LISA WILKINSON:
Something the Government has had no involvement in is the introduction of Aldi. But Aldi say themselves that because of the planning laws that are in place, they can't get into the supermarket shopping centres that they want to get into.
CHRIS BOWEN:
That was one of the key recommendations of the report. Aldi of course has been a force for good in terms of competition in the eastern states and they are trying to expand into the other states.
One of the things we did earlier this year when Aldi came to us and said 'look, the foreign investment rules mean that when we buy our site we've only got 12 months to develop it so its very hard for us to expand'. We've freed that up and changed it to five years, so that's one thing.
The report does say that planning is a problem; it says that the incumbent supermarkets use the planning system to try and keep their competitors out and that's not what the planning system is for. The planning system is there to try and manage traffic and environmental concerns, not to protect existing businesses. But that's what some businesses have been trying to use it for.
So the report recommends that all levels of Government take action and so I'm relying on the Prime Minister, it's already on the COAG agenda, but we're seeking COAG to take recognition of what the ACCC has said in their deliberations.
LISA WILKINSON:
With the bringing in of unit pricing, how is that going to bring grocery prices down because part of the problem is, you say you want competition, but the small supermarkets and the corner stores – they haven't got the man power to be able to do unit pricing.
Aren't you driving those ones out of the market?
CHRIS BOWEN:
Well look there's a balance to reach here. Firstly, unit pricing does give consumers a lot more information. When you're at the shops and you're trying to work out what's best value and you've often got a couple of kids with you, as we can attest, and it's hard to concentrate and you've got all these different weights and measurements. You might have something which is 375 grams and another one's 450 grams and they're different prices and you're trying to work out which one's the best value; it's very hard.
So unit pricing means that you'll have more information or have the total price and then it'll have the price per kilogram or per litre and you can compare. There are some studies done by academics which show that there are significant savings for consumers, different studies have different results and different people will come to their own conclusions. Choice, for example, says that there are very significant savings for consumers and we'll work on this. And the ACCC, on balance, says that consumers would be better off.
Now on to the issues of compliance costs, the major retailers say if they're given time to do it, it shouldn't have any impact on their compliance costs. Woolworths said 'if you give us 12-18 months to do it, it really shouldn't drive up our costs'.
Now for the smaller retailers, of course, there would be increased costs as a percentage, so I need to work with the industry and consumer groups over the next few weeks to try and get that balance right. The last thing we want to do is put more compliance costs on the smaller businesses.
The ACCC recognises that in the report and says that this should only apply to 'significant supermarkets', the key is working out what is significant and where you draw the line. I'll be doing that over the next few weeks in consultation with the industry.
We do need to ensure that everyone has a level playing field, that we're not giving one supermarket an advantage over another. But we do need to ensure that smaller supermarkets aren't disadvantaged. So that's the balancing act that we'll do over the next few weeks.
LISA WILKINSON:
Well the proof is going to be in those weekly shopping bills and I'm sure voters will let you know in appropriate time.
Chris Bowen, thank you.