Coles and Woolworths have been ordered to front a senate inquiry that will investigate the notion that Australia’s major supermarkets are “price gouging” shoppers already battling the cost-of-living crisis.
Greens senator Nick McKim called for the inquiry, claiming the supermarket chains “are making billions in profits because they feel that they can overcharge people without repercussions”.
What you need to know
The investigation will scrutinise the influence Coles and Woolworths have on food prices. It will also look into the large increases in the prices of essentials, the validity of discounts offered and the supermarkets' increasing profits.
With Coles and Woolies making up two-thirds of the country’s grocery sales, both posted recored profits of over $1 billion last financial year — a more than 4 per cent boost from the previous year.
The inquiry is expected to be established next week as Parliament sits for the final time this year, after the Greens secured Labor’s support. Initial hearings are tipped to take place in early 2024.
🗣️ What they said — Economists label inquiry 'cheap populism'
Greens Senator Nick McKim: “For too long the big supermarkets have had too much market power. This allows them to dictate prices and terms that are hitting consumers and suppliers hard. It’s time to smash the supermarket duopoly.”
Investment adviser Scott Phillips on X: “Woolies and Coles have the lowest sustainable profit margin of any operating business on the ASX. If they made *nothing* your groceries might be around 5 per cent cheaper... What a waste of time, effort and attention.”
Australia Institute senior economist Matt Grudnoff told Yahoo Finance last week: “Inflation is higher because Coles and Woolies are increasing their prices more than they otherwise would be if they were just recouping their costs. They are part of what economists call an oligopoly. And, essentially, that's why they're able to earn these bigger profits.”
Economist and Yahoo contributor Stephen Koukoulas told ABC: “The inquiry is cheap populism ... I think it's a bit of a waste of time because the supermarkets are just like any other business. ”
Sydney start-up director and investor Ian Clarke on X: “The Greens are a toxic blend of cynical populism and economic illiteracy. If Coles and Woolworths were ‘price gouging’ their share prices would be soaring. They aren’t. End of inquiry.”
Woolworths spokesperson: “We know Australians are feeling the strain of cost of living and we are working to deliver relief in their weekly grocery shop.”
Coles spokesperson: “Having a profitable business means Coles can continue to serve Australians, invest in our stores, employ the 120,000 team members we employ, pay taxes in Australia, pay dividends to our hundreds of thousands of mum and dad shareholders and ensure long-term sustainable relationships with our suppliers.”
🤔 Why should I care?
Aussies are finding it hard to make ends meet with the rising cost of living most noticed at the supermarket checkouts. Households are trimming their family budgets and are expected to spend less this holiday season. Frustration at the supermarkets making big profits during tough times has even seen shoppers call a boycott of Coles and Woolies.
The inquiry will be used to examine the price setting practices the supermarket giants use and to deliver greater transparency around the supply side, Senator McKim says. “In other words, how and how much they pay for the goods they then sell to Australians,” he told SBS, arguing it would give consumers an inside look.
⏭️ So what next?
Senator McKim has called on the CEOs of Woolies and Coles to “justify their decisions” in the public hearing, but it is not yet clear who will testify when initial hearings are tipped to take place in early 2024.
Yahoo News Australia contacted Coles and Woolworths for comment about who would attend.
💬 Conversation starter
Economist Stephen Koukoulas was among a number of experts who slammed the senate stunt as “populism”, arguing the current rate of inflation has “very little if anything to do with price gouging”.
When asked if stronger legislative tools are needed to address competition concerns, he told the ABC the market will likely work itself out and there isn't clear evidence of market failure in the grocery sector currently. Despite a combined profit of 2.7 billion dollars over the past year, Coles and Woolies are forking out huge amounts of money in taxes and to the people they employ, Mr Koukoulas argued.
The last time the ACCC looked at the competitiveness of Australia's supermarket sector was in 2008.
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