SUBJECTS: Grocery inquiry, unit pricing, Foreign Investment
TIM WEBSTER:
Grocerychoice.gov.au provides monthly comparisons of a basket of selected groceries from supermarkets in 61 regions across the country, it will apparently be updated on the first business day of each month. Now in addition the ACCC has outlined that a unit-pricing scheme will be mandatory in major supermarkets across Australia.
Well Christopher Bowen, of course, is our Assistant Treasurer and he's on the line now.
Hi.
CHRIS BOWEN:
G'day Tim. How are you going?
TIM WEBSTER:
Yeah, thanks for your time. Just for the listener's sake, how will unit pricing benefit them?
CHRIS BOWEN:
Well unit pricing Tim, means a lot more information when you're doing your shopping. You know, when you're going shopping and you're trying to compare prices it can be very difficult because half the time you've got a couple of kids in tow, running around, you're trying to concentrate on the shopping.
What you do is, you try and compare different goods but you're comparing things which are very difficult to compare. You might have one package which is 375 grams, you might have another on which is 450 grams and they're different prices and you're trying to think 'which one is the better value?' Often people, myself included, think 'I'll buy the bigger one that must be better value', and often it's not. So what unit pricing means is on the shelf you'll have the price, then you'll have the price per kilogram or the price per litre, which will mean that you can say 'ok this is now easy to compare, this one's much better value and I'll buy this cheaper one thankyou very much'.
It'll be a lot harder, frankly, to trick consumers because you find some people will say 'lets make it 910 grams and then it'll be harder to work out'. You find this very difficult for people at the shops; you don't walk around with a calculator and you're just trying to get into the shop and go.
So this is about making it a lot easier for consumers. A lot of independent studies have found that there can be quite significant savings actually, doing it this way and that's certainly our view of choice and the ACCC, on balance, thinks it's worth doing and we're happy to do it.
TIM WEBSTER:
Ok, now that's good for us, but Coles have said that unit pricing will cost them a lot of money and they'll simply just pass that on to us. What's your reaction to that?
CHRIS BOWEN:
Well Woolworths says it won't. Woolworths says it won't cost them anything, providing we do it properly, providing we do it over a period of time. We don't just walk out and say you'll have this up and running tomorrow. I want to have a light-handed and flexible approach to try and minimise the cost, so that they don't get passed on, particularly in relation Tim, to the smaller grocers because they don't have the big software and computer programs that others have.
So I do need to strike the balance here, which we'll need to do over the next few weeks in consultation with the industry. We need to have a system as broadly as possible. I don't want to give one supermarket an advantage over another. On the same token, I don't want to apply excessive compliance costs on small business in particular.
So we'll follow that through with the industry and the consumer groups over coming weeks and we'll work out exactly how it will all work.
TIM WEBSTER:
Now, on the politics of it, I'm sure you've heard today on a number of radio programs, we had Pricey speak to an apple farmer here today. This difference in the price between the farm gate and what we pay appears to be a very big gap, but the ACCC found there's no collusion, there's no cartels, it's just, if you like, another one of those 'comfortable oligopolies', is it?
CHRIS BOWEN:
Well what the ACCC found, and the first point to make is that they have recommended some reasonably significant improvements to the Horticultural Code, which is the code which governs the relationship between farmers and people who buy their goods, although it hasn't covered supermarkets under the arrangements we've inherited and the ACCC has recommended some changes there. Which is what Tony Burke, the Minister for Agriculture is doing with his Horticultural Code Committee, so we'll take those on board.
So that's the important thing in terms of the action recommended, the ACCC has said that there are improvements that can be made. But what they did find is that across the board while Coles and Woolworths are very tough in their negotiations, or in their relationship with their suppliers, they don't find any across the board issues of illegality et cetera in those terms. Of course everybody has input costs, farmers have input costs and retailers have input costs and there's transport and there's every person whose hand that goes through along the way, makes a little bit of profit as it were.
You will of course find differentials between the farm gate price and the price at the supermarket, but of course the more transparency that we can get to there as we go forward, the better.
TIM WEBSTER:
You know I pulled a couple off the website just, when I knew I was going to talk to you about inner Sydney north and I've got outer Sydney west, so that's a long way away from each other. The difference is, between Coles and Woollies, on one of them is about 60 cents and on the other one it's about $1.50. So it is comfortable isn't it?
CHRIS BOWEN:
Well this is one of the things that the ACCC found again, that the competition between the two of them is not as vigorous as it could be. It's workable, so they do compete with one another, but neither of them decides to get vigorous in their competition with one another. In other words, they match each other.
If Coles reduces their prices then Woollies will match them. If Woollies reduces their prices, Coles will match them but they don't really seek to undercut each other all the time. They did find and this matches the experience I'm sure many of your listeners, that Aldi is a very competitive force and in the 40 regions that Aldi exists they are the cheapest in all of them. Now, again, you have to balance that against – Aldi had a very different business model - you don't get the choice that you get in other supermarkets, they have a more limited range, you pack your own boxes, you take your own bags et cetera, so it's a choice for consumers as to what's more important to them.
TIM WEBSTER:
Yeah, and Graeme Samuel did say, and this is the good thing, Woollies and Coles used to just whinge if Aldi was going to start up in their area, they've got to get on to them about that.
CHRIS BOWEN:
Absolutely. The planning system has been used and gamed for anti-competitive purposes. So you get businesses, and it's not just Coles or Woollies by the way, but you get businesses objecting to other businesses coming in on the basis that it's bad for their business, or even worse in my view, on other grounds that may be traffic or environmental, when really there are no objections on traffic or environmental grounds, they're just trying to keep a competitor out.
So we need to make sure that the planning system is not inhibiting competition because the planning system is there to ensure amenity and that there are no adverse traffic impacts or environmental impacts, the building is well designed – it's not there to protect existing businesses, whether they be Coles or Woolworths or anybody else.
TIM WEBSTER:
Chris just finally, and again on the politics of it, there certainly was, and you know this to be true, an intonation before you were elected that you could do something about grocery prices and oil prices and I saw you on tele last night saying there's virtually nothing you can do about grocery prices.
CHRIS BOWEN:
Well, what I said yesterday Tim is exactly what the now Prime Minister and the now Treasurer said before the election, is what I'm saying after the election, what I said before the election – there's no guarantee that we can bring prices down, but what we won't do it sit by and say 'well we don't think there's anything we can do about competition, we're not interested in knocking down the competitive barriers. We said before the election in all these things, well we think we can make things a bit more competitive, we can knock down these barriers, we can minimise them and that over time, puts downward pressure on prices. But the biggest impact on prices is the drought or international factors so we're not in – anyone who can pretend to you that they can guarantee that they'll bring prices down is treating you as a mug and that's what we said before the election and we say exactly the same after.
We believe in competition and we want to get more of it in and consumers will benefit and that's our policy and we're not in the business of giving false guarantees that we can't keep.
TIM WEBSTER:
Yeah and look, all you really want in good Australian Parliaments is for people to be fair dinkum with you, that's all you're after.
CHRIS BOWEN:
And look, as I say, people will then be able to make their own choice. If there's fair dinkum, vigorous competition people will decide I like this store it's convenient, it's a little bit more expense, but I like the range and I like the customer service well good on them. As long as there is a choice there; that they have the various business models available to them to choose from.
TIM WEBSTER:
Look, I said finally, but just one quickie – with Coles and Woollies, I mean the do own the game, they've got about they've got about 80% of it and we're talking $70 billion, it's a hell over a turnover for both of them. Is there something the Government, and I'm not about bashing Coles and Woollies, I mean the Woollies have great stores, the Woollies in my area's a beauty, but is there something you can do to make them more competitive with each other, and allow more players into the game to compete with them?
CHRIS BOWEN:
Well it comes down to those things Tim about the planning system, about retail leases. The inquiry uncovered a lot of leases where supermarkets and shopping centres have done a deal to say 'we'll come and open a supermarket in your shopping centre and we'll pay you extra rent if you don't let anybody else open a supermarket for the next 20 or 50 years in your shopping centre, so they have an effective monopoly. So that's illegal and the ACCC will deal with that as appropriate, as they go through and combine that with the planning system. The foreign investment changes that we made a couple of months ago to encourage more foreign-owned grocerers and retailers to come in.
When you add all these things up then you do find that you're making the industry more open for business, that's what you can do and that's what it's all about.
TIM WEBSTER:
Good on you, thanks for your time.
CHRIS BOWEN:
Pleasure Tim.