SUBJECTS: Grocery prices, grocery sector competition
TIM WEBSTER:
Hi
CHRIS BOWEN:
Good morning
WEBSTER:
We have to break the duopoly of Coles and Woolies because it's hurting us isn't it?
BOWEN:
All the evidence is when we have more competition, regardless of whether its groceries or another sector, we have more people competing for our funds as consumers, then we win as consumers, prices come down and that's what this move is about.
A number of people came to the government and said look we want to expand in Australia, we want to open more stores, employ more people, give people more choice but we can't because of these foreign investment restrictions. Because if we buy a vacant block of land to build a shop on, a supermarket or another sort of retail outlet, you only give us 12 months to do it and that's not long enough with planning requirements, council approval, by the time we get builders etcetera and we thought they made a very good case.
So we're extending that now to five years, because you do need to have some restrictions, you don't want land speculation and land banking going on, people buying land and sitting on it. Five years is a good balance. It's long enough to get something up and running.
Considering that often that these proposals are for new estates being opened up and land for retail. Somebody like Franklins or Aldi who are both foreign owned might look at that and say we would like to buy there and build there but the estate wont be ready in 12 months so we can't buy ahead. This really gives them a level playing field which is what it's all about and consumers benefit from the increased competition.
WEBSTER:
Massive joints, like that Wal-Mart, and there already in Asia, would obviously be interested in here wouldn't they?
BOWEN:
They may well be, but this is just about giving them the opportunity. I'm not an advocate for any particular group, that's not my job, but my job is to make sure that there's as much competition as there can be. That there's no artificial barrier, the government's not getting in the way. Government was getting in the way so we've moved to fix that.
WEBSTER:
Because IGA for instance struggle against Coles and Woolies now.
BOWEN:
There are issues there and the grocery inquiry is looking through all those which reports back to the government in July. This was one obvious step which was clear which is, as I say, it's not just about groceries. You've got IKEA and other international people who want to expand as well.
WEBSTER:
Building on this current inquiry, I will be fascinated and I am sure you will too when the results comes out from the ACCC, from the farm gate to the supermarket counter, and what it costs us as consumers when we get in to the supermarket aisle. It's throwing up some interesting stuff.
BOWEN:
Well look it is. There is a lot of good hearings going on, and people are getting their say, a lot of very interesting submissions, and you're right it will be a fascinating report. I dare say it may well make nobody happy, because it will be a warts and all examination of all the factors of the supply chain, from farm gate to check out counter and a lot of issues to be worked through.
I don't expect to it say, look here is a magic bullet Chris Bowen, if you do this you will fix all the grocery problems. But these are all steps which you can take, which are modest by themselves, but which add up and over time more competition means consumers get more choice. Out where I live in Fairfield we've got two Aldi and they're very popular and people like the choice. Even those of us who don't choose to shop at Aldi benefit from competition, because the price comes down elsewhere at Coles and Woollies and everywhere else.
WEBSTER:
Well that's the point, me too, where I live there is an Aldi and a Woolies and you do have the choice and if Walmart and Costco and all the others are going to be around there is more choice. Makes sense doesn't it.
BOWEN:
Yes absolutely.
WEBSTER:
Yes because the farmers are already saying, and quite rightly, look how come I am getting $2 a kilo for my beef and they're selling it for $15 a kilo in the supermarkets. It's a big mark up.
BOWEN:
Well look this is the reason we've had this inquiry. We've had the highest grocery price inflation in the developed world. You go to farmers they will tell you they're not seeing much money, and they're right, so something is going wrong somewhere along the supply chain.
There are a lot of reasons why food is more expensive than it is used to be. Partly it's the draught, partly it's the big increase in demand for food around the world. In places like China demand more and more food, that sends prices up. We do have a problem in Australia, our food price inflation has been much higher than countries we normally compare ourselves with. That's what this inquiry is all about.
WEBSTER:
You might not have seen it, but we've on the channel ten news have been running a series of stories on Brewarrina this week…
BOWEN:
Yes I've seen some of those…
WEBSTER:
A dreadful state of Aboriginal health but there was a very salient point in there. One of the medicos, who is trying to look after these people who are waiting for kidney transplants etc, was saying the price of fruit and veg in Brewarrina is dearer than going to Maccas. Now while that is ever the case, we're in trouble.
BOWEN:
The Cancer Council actually did an interesting study on this, I think it was about a month or so ago, about the price difference for good food, food that's good for you, in different areas. And they made the point that in some areas, healthy food is so much more expensive than in other areas and that makes healthy living very hard in those areas. Again I think the Cancer Council has made a submission to the grocery inquiry and the grocery inquiry will look at those things, but they're the sorts of issues that many people might not often think about it, but which we need to examine if there is anything we can do to make it easier.
WEBSTER:
Now going back to the beginning so the listeners understand what you're about here is to make life a little bit easier for overseas investors who want to get into the grocery market in Australia.
BOWEN:
Absolutely, as I say there are companies who have come to us and say look, we are ready to open more stores, employ more young people and give people more choice. But we can't do it because of these restrictions, could you please take these restrictions off?
They make a good case. We don't want red tape for the sake of red tape. We want sensible regulations which strike the right balance, they weren't striking the right balance. Consumers were missing out on more choice, young people were missing out on jobs and it just didn't make any sense – so we've fixed it.
WEBSTER:
Finally, I suppose there is a downside, or could be, could it be the death knell for the smaller operators?
BOWEN:
I don't think so. Smaller operators have issues and again the grocery inquiry is looking through those issues. We want everybody to compete on a level playing field and if there are artificial barriers which are there for smaller operators, then the grocery inquiry will deal with that. This is just about more competition which everybody wins from. We don't want any artificial barriers which are stopping people from getting in and having a fair go.
WEBSTER:
Thanks for your time.