Wednesday, 15 August 2012
Matters of Public Importance
I have received letters from the honourable member for Kennedy and the honourable Leader of the Opposition proposing that definite matters of public importance be submitted to the House for discussion today. As required by standing order 46(d), the Speaker has selected the matter which, in his opinion, is the most urgent and important; that is, that proposed by the honourable member for Kennedy, namely:
The need for urgent federal government intervention to divest the two supermarket giants and give owner operated business, Australian farmers and customers increased competition, greater choice and a fairer deal.
I call upon those members who approve of the proposed discussion to rise in their places.
More than the number of members required by the standing orders having risen in their places—
In 1991 in Australia, two supermarket giants had 50.5 per cent of the food market. In 1999, John Howard, the Prime Minister, agreed to an inquiry. By that time the market share of the two supermarket giants had risen to 65 per cent. Everybody knew that their market share was shooting through the roof. The inquiry, comprising all parties, including the Australian Democrats, effectively recommended that nothing be done.
There were three alternatives. One was, as the National Association of Retail Grocers of Australia, or NARGA—the independents—asked for, a capping at and divestment down to 22 per cent of market share for each of the giants. A second was to go to American trust laws. The third alternative was to considerably strengthen the Australian Consumer and Trade Practices Act. Not one of the three alternatives was adopted by the committee. No-one can read their report—an excellent report, I might add—and not understand that the major parties in Australia are controlled by Woolworths and Coles.
No other country on Earth would accept this situation. Let me give you the figures for other countries. The report I am referring to, Fair market or market failure, gives the figures for other countries. There is not one other country on Earth where the big three have even 25 per cent. But in Australia, when this report came out, they had 65 per cent.
Franklins and Davids have vanished into the mouths of the two giant whales—and when the last report was done in 2002 by AC Nielsen, which tracks the figures, they were on 72 per cent of market share. So when should we act—when they have 100 per cent of market share? But in every report—the AC Nielsen series, the ABS series and this report here—every single one of them, including Woolworth and Coles, claims they have two per cent annual market growth. They had 74 per cent in 2002—I think most people can add up—and we are now talking about 90 per cent.
In America there are 22 books on the shelves about Wal-Mart because there is a huge outcry in America. Wal-Mart and their nearest competitor have 23.1 per cent of the American market. Americans are screaming blue murder over that 23.1 per cent. But our two giants have 90 per cent. What is the result of that? What happens if you give two giants ownership of your liquor, petrol and food? There are only two people for farmers to sell to and there are only two people for consumers to buy from.
I have spoken thousands of times in this place about the horrors of deregulation. I will go through them. The milk industry was the first to be deregulated. Let me go through the figures. I must emphasise that these are not my figures; they are ABS figures. The price of milk was 59c a litre under an arbitrated price system—the famous tribunal. The day after deregulation we were paid 42c a litre. Was that difference passed on to consumers? No. The price for consumers went up by over 25 per cent over the next two years. So Woolworth and Coles—there were others too, but it was mainly them—took away from the table an extra $1.3 billion of profit a year. That is what they got; that is what we delivered to them through deregulation.
I say to the people in this place who have advocated national competition policy that the one thing it never delivered was competition. It delivered monopoly powers. Every day that goes by, more and more Australians are destroyed by it. After deregulation, the price of eggs to the consumer rose from 185c a dozen to 293c, almost a doubling in price, the price to farmers went down by 12c a dozen, and the boys in the middle got $240 million extra. When we deregulated the sugar industry and removed the tariffs, we got wiped out to the tune of $360 million. That extra profit went to Woolworth and Coles. Again, the price in the stores went up by 20 per cent.
We have had inquiry after inquiry. I do not understand this and I will never understand this: each inquiry says there is no problem. When two people own 90 per cent of the marketplace they tell us there is no problem! After the last inquiry, I went down to Coles at Manuka and bought a one kilogram bag of sugar for $1.35. The price paid to the processor and the farmer was 39c. They get 40c and Woolworth and Coles get $1.35. Packaging must cost a lot! For eggs, the farmer was paid $1.40 and the price there was $4.85. I have the dockets. For milk, 65c went to the farmer and the processor, and the cost to the consumer was $1.99 a litre. Coles are making a big deal about cutting that down to $1, but for 11 years we were talking about $2. Here is my docket—at Coles it was $2. Well, they made plenty. If they are getting a little bit back which they are not giving back, it is over the dead bodies of the farmers—quite literally. Within two years of dairy deregulation there was a farmer committing suicide every four days in this country.
Finally, potatoes—and you can really justify a lot of processing with potatoes! The farmers got 62c a kilo and Coles were charging $2.46 a kilo. I can continue to reiterate these prices, but everybody in this parliament knows Coles and Woolworths are quite literally having a picnic over the dead bodies of our farmers, and it will continue until there are no farmers left.
Coles and Woolworths are buying from overseas, and our chances to get the message through are very limited when the Fairfax press is controlled by Roger Corbett, the chairman, who was head of Woolworths. He is also on the board of Wal-Mart in the United States. They have got unlimited trading virtually everywhere in Queensland. They can wipe out the after-hours stores—so there are no ma and pa stores. How the single mothers and retired people in the suburbs get to supermarkets now I do not know. It is very difficult for them to go shopping now because they have got no local store.
The service stations were not allowed to have groceries when we were in government in Queensland. That was specifically to keep the oil companies out of—and to protect—owner-operated businesses. That has been abolished, of course. The service stations are now controlled and owned by Woolworth and Coles. So all of that after-hours trade has moved completely over to them—and what they haven't got they are going to get by 24-hour trading wherever they go.
We cannot sell on the world market because of the massive subsidies from the other countries. It is almost impossible for us to compete on the world market. So we come back to the Australian market, and week after week, day after day, product is brought in from overseas. Hardly a week goes by where there is not something in the papers about some new commodity coming in from overseas. I am told that Woolworths has a whole three-storey building employing people doing nothing else except sourcing cheap food from overseas.
We cannot compete in apples. I said, 'Hold on, it's America and New Zealand,' and they said, 'Yes, $9 an hour.' We would pay $19 an hour, and so we should, but the wage in the United States in California is $9 an hour, and in New Zealand it is $9 an hour. The apples will also be coming in from China, where the average income is $5,000 a year. How can we compete against those apples? Everybody knows they have fire blight. You had the reason to keep them out, but you did not. You are so in love and enamoured with and obsessive about free trade that you will bring those apples in knowing that they have been sprayed with streptomycin, antibiotics, to get rid of the disease. You know that.
So I will be moving legislation in this House so that, if you want to bring an apple in from those three countries which have fire blight and spray with streptomycin—because we have no way of checking whether it is sprayed with streptomycin—every apple will have a marker on it. We heard the minister stand up today on cigarettes. There is a serious danger to our health from these apples. Every one will have a marker: 'This product has not been grown or processed under Australian health and hygiene standards and may be injurious to your health.'
I say with very great pride that, as the minister, I have been attributed with the creation of the prawn- and fish-farming industries of Australia—and no doubt my department played a very key role in the establishment of those industries. Prawn and fish farming in Australia rose up to $600 million at one stage. We have virtually no prawn farming at all now in Australia. We thought we would catch Thailand at $2,000 million. Thailand has gone up to $8,000 million; we have gone down to nothing. And that is because Woolworths and Coles are bringing their prawns in from Vietnam, China and Thailand.
In Vietnam they actually use raw sewage in the ponds. In Thailand, they put the raw sewage in the river, and in China they put raw sewage in the river and take raw sewage out. We have to have pure, bacteria-free water going in and pure, bacteria-free water going out, which is impossible, so forget about any prawn farming in Australia. But those prawns are coming in, and we know they are carrying diseases. They have to be. They are being brought up in a bacterial environment. So once again, as far as I am concerned, every single little box of prawns anywhere in Australia will carry that label on it. At the very least, that will slow Woolworths and Coles down from bringing them into Australia.
Every other country has laws protecting against monopolistic powers—oligopolistic, if I want to be technical. Every country on earth has that. We have no laws that protect. Clearly, they rose from 50.5 per cent in 1991, after inquiry after inquiry after inquiry, up to 92 per cent—and these are their own figures, not mine; they are not my figures. Every year they claim they have a growth in market share, and I have been tracking them since the ABS series was discontinued and the AC Nielsen series was discontinued. There was to be a review in 2002. Both series were discontinued in 2002, so we could not prove anything because there were no series there anymore. I am not a conspiracy theorist, Madam Deputy Speaker, but it is pretty difficult to write around that one in 2002. But, since 2002, Coles and Woolworths have skited to their shareholders about their growth in market share. Add that to the 74 per cent they had in 2002 and you have 92 per cent, and we are still doing nothing in this place.
I formed a political party—and I will probably conclude on this note. A newsagent, Roger Piagno, in Mareeba, jumped out and said, 'What've you formed a new political party for?' I said, 'How many shops have we got in the main street of Mareeba, Rog, do you reckon?' He said, 'Oh, about 150, I suppose.' 'How many are we going to have in 15 or 20 years time?' He said, 'Two.' I said: 'Good. That's why I formed a political party!' And he walked inside. You have to seriously contemplate forming a new political party in this country to get a little bit of justice for every single person. There will be no newsagents. There will be no chemists. There will be no florists. There will be no bakers. There will be nothing. They want it all, and this place has facilitated giving them it all.
Forget about mixing with powerful people. You do not have to mix with powerful people. Mix with Australians and be proud of it and do the right thing by them. Woolworths and Coles must be acted upon. Every four days, a farmer in Australia commits suicide. And that is the note upon which I conclude.
I appreciate the opportunity to contribute to this debate and thank the member for Kennedy for bringing this important matter of public importance before the parliament. I know that the member for Kennedy is a very passionate advocate of people in his part of the world. Certainly much of the passion that we have come to see from him in the past was evident in that contribution today.
I would like to address the issue that underlies the matter of public importance today. I begin by saying that, whilst I think there is a general acknowledgement of some of the concerns that are raised in relation to the use of market power generally across various markets in this country from time to time, it is the government's position that the existing competition framework is adequate to deal with many of these challenges. Certainly we stand ready to consider any evidence that might suggest that there are other alternatives, more appropriate means, through which better outcomes can be achieved. When we ask the question about what those better outcomes might be, we must bear in mind the question, obviously, of the interests of producers, but ultimately we need to ensure that we have an efficient and productive economy and one that is giving consumers a fair go and a fair deal. That is ultimately at the heart of our approach to competition policy.
When you look at the major supermarket chains and the supermarket sector, you see that upon coming to office this government directed the ACCC to undertake a specific inquiry into the major supermarket chains and the retail sector. There were a number of findings that came out of that review.
In particular, that review found that there was workable competition within the supermarket sector. The review did indicate that, in particular, smaller players like ALDI were playing an important role in introducing competition into this sector. It is worth noting that ALDI represents a very small part of the overall market, as do some of the other independent operators and some of the smaller players, like IGA. I think it is worth noting the respective market shares of the major supermarket chains. Here I am citing data from the IbisWorld Supermarkets and Other Grocery Stores in Australia report, which indicates that Woolworths has approximately a 40 per cent market share and Coles has approximately a 31 per cent market share.
Inherent in this matter of public importance that has been brought forward is the clear suggestion that there should be some divestiture of the market share that those players currently hold. What is unclear, and what is a difficult question for proponents of divestiture to answer, is what might be an appropriate threshold for market share to be set at. Indeed, just as difficult a question to ask and to answer is how one might determine and define that market share. One of the things the ACCC's inquiry into the retail sector showed was that for an overwhelming majority of consumers—in particular in metropolitan areas, where it was more than 90 per cent of consumers—most of their shopping is done within five kilometres of where they live. This gives rise to the very question of market definition: what is the market? If the test here is one of market size or market penetration, then obviously one needs to go through that exercise of defining what the market is.
More broadly, the approach this government has brought to competition policy—which is consistent with approaches that have previously been taken—has been to say that market share, on its own, is not determinative of whether or not a competitive framework exists. You need to have a look at the full range of factors. People talk about monopolies, but clearly we do not have a monopoly. I am not trying to be technical about it, but we do not have a monopoly. There are people who call it a duopoly, but we do not have a duopoly. We have a market in which two major supermarket chains have very significant market shares; there is no question about that. But I will make this observation: it would be fair to say that in recent times we have seen more robust competition in the grocery sector than we have seen for a very long time. This is feedback that I get in my community, and I know many others get it elsewhere. The very vigorous competition that is currently in play in our major supermarket chains is on display for all to see. I would not entirely attribute the current price deflation to that competition, but I think anyone who brought any serious analysis to the price deflation that has been experienced in recent times would have to acknowledge that the aggressive competition that has been occurring between Coles and Woolworths has contributed in part.
That leads to all sorts of debates. One of the debates we have had before committees and in the public more generally has been around milk prices. Two parliamentary committees have looked at this. The first parliamentary committee looked at it because milk prices were too high; the second parliamentary committee looked at it because prices were too low. That raises all sorts of very serious questions about what we are hoping to get out of these inquiries and, ultimately, what type of marketplace we are looking to operate within. The government takes the view that competition policy is always about a balance. It is about ensuring that we have a set of rules and a framework in place that allows serious competition to exist between competitors but, at the same time, makes sure that ultimately the best outcomes are being generated for consumers.
Mr Katter interjecting—
Perhaps I could address the issue of divestiture, which is at the heart of this matter of public importance. There are a whole series of very difficult questions that proponents of divestiture have to answer. I have heard many discussions, but I have not heard too many answers to these questions. The first one, which I have already identified, relates to market definition: what is the market? Secondly, what percentage of market share is appropriate, and what is not? I have just gone through the figures: 40 per cent for Woolworths and about 30 per cent for Coles. Let's just say, for argument's sake, that someone says 25 per cent is the appropriate figure.
I am not seeking to engage in argument on this. The figures I quoted were from the IbisWorld Supermarkets and Other Grocery Stores in Australia report from this year.
Let's assume for just one minute that proponents of divestiture are arguing that 25 per cent is the cap—that that is the limit on what market share should exist. That means anyone who has more than that in market share is going to have to forgo stores all around the country. One has to ask the question: where are the first stores that are given up going to be? Are they going to be the most profitable stores? I suspect they will not be the most profitable stores; I suspect they will be some of those stores in poorly serviced areas, often in rural and regional communities. It is worth noting that we are talking about companies that employ a significant number of Australians; in fact, the numbers are in the thousands, if we put the two major supermarket chains together.
If we are to force divestiture, which is the proposition we are talking about here, that would mean Coles and Woolworths would have to basically sell some of their stores. I put it to you that it would be the least profitable stores that they would be willing to sell. I also ask the question: who is going to buy these stores? Quite often the people who are most opposed to divestiture are the people also most opposed to foreign investment. It is most likely that the lack of capital that exists within this country means that foreign capital will come in and pick up those stores. I assume that we are happy with that foreign investment, but I understand that is not without contention in this place. The ACCC report indicated that ALDI, which is foreign owned, was a force that was bringing competitive pressure into this sector. So we see that the complex dynamics of divestiture are not as simple as the suggestion that you simply divest.
I put it to you all that there are legitimate concerns being raised in relation to market power. There are a number of changes that have been made to our competition laws in recent times, many of which have not been tested before the courts. The ACCC Chairman, Rod Sims, has indicated that the ACCC are undertaking very, very robust inquiries in relation to some of these matters. I think it is important, and the government believes it is important, that we give the regulator the opportunity to test the laws that have already been introduced. If it is the case that there are suggestions that the laws are ineffective or inadequate to address clearly identified problems, then of course the government will consider what action that requires.
Can I make some further points in relation to the lack of alternatives to the approach that the government has outlined. I know that the opposition will have their opportunity to contribute to this debate. I was really interested to find out what their position on competition policy was. I had a look at the coalition speakers notes that were leaked a bit earlier this year. There are about 140 pages, and I searched the notes page by page from front cover to back cover and I could not find anything about competition policy. I then thought that it must be in there under consumer policy. Well, there was nothing under consumer policy either. In fact, I was alerted to this by an article, an opinion piece, that I saw in the paper this morning from Peter Costello, who said:
Recently, Nationals senator John ''Wacka'' Williams called for an ombudsman to be given the power to force supermarkets to increase prices.
… … …
But a statement like that should draw a response from political leaders lest people start thinking it is serious.
… … …
A government has to decide whether it is for the consumer or the producer.
… … …
The Coalition has committed to a ''root and branch'' review of competition policy. This will be another showdown between rational economics and rural populism.
We know who has the balance of power over there at the moment—it is the rural populists. The rural populists are in control. Well, at least in opposition the rural populists are in control. When I heard about this root and branch review I thought that maybe there is a policy. So I went to the website of the member for Dunkley, who is the shadow minister in this area. I thought that perhaps he had set out some of the problems that they have identified and need to be assessed in this root and branch review. When I looked at the website the word 'competition' only appeared in the headline. There was no reference to competition. In fact, the Competition and Consumer Act, the relevant piece of legislation, was not mentioned. The only thing I could see a reference to was the Australian Accounting Standards Board. I have been scratching my head all day trying to understand what connection that has with competition policy.
Let's not forget that there have been two major reviews of competition policy in the last 20 years—the Hilmer review and the Dawson review. And let's not forget that neither of those reviews recommended divestiture powers. Indeed, the last root and branch review, which was the Dawson review, recommended a couple of interesting things like the criminalisation of cartel conduct, which is something that the former government sat on for year after year and did nothing about. It took this government to come into power and to introduce legislation to criminalise that conduct.
We will continue to monitor developments within the marketplace. To the extent that evidence emerges that there is misuse of market power that extends beyond those powers that the ACCC currently has, we will stand ready to consider any future changes. (Time expired)
There you have heard it. There you have heard the Labor line that there is no problem to be found anywhere in our competition laws. It is quite remarkable to hear the Assistant Treasurer. I remember having a debate with his predecessor in the then Prime Minister's seat when I was outlining the coalition's policy dealing with the need for a root and branch review of the competition framework and that was extremely well received. Then Dr Emerson, who was my opposite number at the time, ran the same line. He said that there was no problem to be found and that the Labor government was perfectly happy with the current set of arrangements. And there you have heard it again today from the Assistant Treasurer. He said: 'The existing framework is adequate.'
I cannot agree with that. In fact there are two absolute certainties in this competition space that I think we all might be able to agree on. One is that everything is not okay. I think we can agree on that. I think that is pretty clear. We see pressures in our marketplace day in and day out and some of those have been touched upon by earlier speakers. I think we can also agree that there is no single silver bullet to fix this. The member for Kennedy has outlined the etymology, if I can use that language, of some of the challenges that he sees, and I would like to add my account of some of the challenges that are also there.
I am absolutely certain that there is no single action that will address the issues that are here now. I think we can agree on those two things: that Labor is absolutely wrong in saying everything is peachy sweet about the current competition laws in Australia, that there is no problem to be found anywhere in the economy. I think we can also agree that there is no simple, single solution that will remedy the pressures and tensions that the coalition sees and has been identifying. That, I think, we can agree upon.
The proposition that is being put forward today by the member for Kennedy is that the government should be given some powers to intervene to divest in the two, as he calls them, supermarket giants. I should help the Assistant Treasurer: there already are powers in the competition law of Australia to deal with divestiture. They already exist. They exist to the extent that a merger or acquisition has been transacted without receiving the appropriate approval from the ACCC and that that would amount to an adverse impact on competition.
There are a whole lot of legal definitions that sit around it but if someone proceeds with a merger and acquisition and it has the effect of substantially reducing competition then there is a divestiture power available. So that power already exists. If an approved merger or acquisition proceeds, but some of the undertakings or terms under which it was given approval—given consent—are not adhered to then there is also a power for the ACCC to instigate divestiture.
So for those who are talking about divestiture power, there are already mechanics in the current law to deal with those things. That is not dissimilar from the laws that exist in other jurisdictions. There has been some talk about what happens in the UK. There is the same arrangement: if a merger or acquisition that has been progressed with has a detrimental impact on competition then there is a divestiture power. Under the antitrust laws in the United States it is the same as well. In that respect we are not so different.
Where we are different, though, is in the way in which two very dominant players in this supermarket space are able to work within the railroad tracks of the current law—therefore, not break the law—but, in effect, put pressure on a pro-competitive, pro-consumer, pro-economic prosperity future that we would hope for for the country. That is real. We see those pressures popping up in a number of places: the growing market concentration in key areas and the key impact these dominant players can then have over suppliers, where they exert pressure and have an influence that leads suppliers to make, in some cases, decisions that are against their own economic self-interest. Why? Because there is nowhere else to go.
That is not against the law. It is not helpful for our economy. It is not helpful for innovation and diversity and choice in our supply chain. I think it is not helpful for the durable interest of consumers in Australia, but at the moment it is not against the law. That is a problem with the law. It shows that the Labor reassurance that the existing framework is adequate is simply not right.
The provisions in section 46 relate to the misuse of market power. For those who want to lie awake at night, have a read of section 46. It was the provision that those reviews that have been relied upon by the Assistant Treasurer said would catch everything. If there was a kind of mischief going on from a dominant player in the market place, section 46 would be the answer. Yet reality has shown us that you need to be asleep to break those laws. The requirements to offend those laws are so steep, so demanding and so difficult to prove that there are very rare cases where a prosecution has been successfully brought. And where a prosecution has been brought the penalty is to be slapped with a wet lettuce leaf. So this omnipotent provision under section 46 dealing with misuse of market power, which promised so much, has not delivered what was promised. We think that requires examination.
Look at some of the mandatory codes. I concur with some of the views that the member for Kennedy pointed out. The horticultural code is a piece of fiction. It just does not achieve what it aims to achieve. We have seen problems with the grocery code and we see this in the franchising area as well. They have not lived up to the ambition that led to their formulation. In reality they have not had the impact that people had hoped for.
If you are a small business, a grower or a family enterprise seeking to access some of the remedies and sanctions to draw upon and activate some of the provisions in the current consumer law, your simple size can make that out of reach. You can be faced with a goliath of another party that you have some grievance with, and frankly you will run out of money before you get your case considered. This is unsatisfactory.
Aficionados can even look further. Some of the access regime that is currently in place does not lend itself well to trade exposed issues. Some 20 years ago this framework that we operate within now was formulated, and it has largely been unchanged since. Yet the marketplace has changed. Some of the ideas that Professor Hilmer contemplated two decades ago he thought would have certain effects when, in reality, they have proven not to perform in the way that he though they would.
The market share of the supermarket chains has been touched upon. That has continued to grow and it has created new challenges to the competitive landscape in Australia. It has put pressures on suppliers. It has enabled those dominant players to encourage people contributing supplies, services or goods to do things they otherwise would not do. They are now up against price points from international competitors.
I saw this when I was up to my calves in cow poo down near Colac talking to a dairy farmer. He was telling me, 'Bruce I've got the carbon tax and all these other pressures putting upward pressure on my costs, yet I have been told by my milk processor that I'm going to get 10 to 15 per cent less for my milk next year.' Why less? Because the supermarkets wanted to go down, down on their prices. What that was representing was down, down pressure on what the milk processor was being paid. And the milk processor, in turn, was passing that through to the dairy farmer.
What was the price point? The price point was an overseas competitive supply option. So they are basically being told, 'We'd love to keep taking your Australian grown stuff; we'd love to keep taking your milk, but for us to do so you need to compete with imported dairy inputs that really are your price point regardless of what it costs you to survive.'
Hilmer did not anticipate this. Twenty years ago you could not see those pressures. Twenty years ago you saw people advocate that section 49, the price discrimination period, be repealed. Why? Because section 46 would be the answer: it would solve all of these problems. You did not expect that a big business would go to their suppliers and say, 'We don't think Christmas is going to be as good for us as we thought. How about you take five per cent off your invoices? We'll pay you in three months.' They said—I am quoting them—'That will be an investment of mutual benefit to both our organisations.' What choices do you have? Where do you go?
This is where fair competition supports a productive and efficient economy. We are seeing behaviour at the moment that is not unlawful—it does not breach our highly prescriptive laws in this country—but it is certainly not pro-competitive. I have my doubts about whether that will support the long-term economic prospects of our nation and the durable interests of consumers to support innovation and choice. Surely, that is what competition laws should be supporting. We have highly prescriptive laws, some of the most codified laws anywhere on the planet. As long as businesses know those laws and work them hard—and in some cases game them—to stay between the railroad tracks of what is lawful and what is not, they can push on.
But is that what is going to support our long-term economic interests and durable benefits for our consumers? The coalition does not think so. That is why we needed a sober, objective, evidence based examination of the pressures on our competition laws in Australia—to look at what might work so the remedies are fit for the purpose and do what we anticipate, and to test what is going on internationally. In other jurisdictions the laws have the capacity to deal with these pressures; our laws do not. Laws in other jurisdictions are sharper and reflect the longer term interest. That is what the coalition is all about and that is what we should be supporting. (Time expired)
Listening to the member for Dunkley you just do not know whether the coalition is Arthur or Martha on this issue. In fact, I found two quotes from their spokespersons in relation to this issue which demonstrate the failures of the coalition when they were in government, including their failure to put forward a consistent narrative on this issue. Senator Barnaby Joyce in a media statement on 15 July this year said:
Over the past 30 years—
during which both sides of politics were here—
food prices in Australia have increased by 189 percent. Much higher than many others, in the UK and US food prices have increased about 120 per cent, while in Canada they have only increased by 90 per cent.
Then you have the Leader of the Nationals, when he was a minister in the previous government, launching a report, Price determination in the Australianfood industry, explaining the differences between farm gate, wholesale and retail prices and talking about the fact that the report found that the relatively low grocery sector profit margins in Australia were largely a result of strong international and national brand presence together with 'a highly competitive retail sector'. That was in his speech to the ABARE Outlook 2004 conference. So you just do not know where the coalition stands on this particular policy.
I believe the member for Kennedy is sincere and genuine in what he says. We saw that in the passion that he displayed here today. But he claimed that the major political parties were controlled by Woolworths and Coles. During the last state election in Queensland—and I happen to represent an electorate in south-east Queensland—you had bunting, posters and advertisements saying that Woolworths and Coles ran the country. Woolworths and Coles do not raise taxes, they do not declare war and they do not run schools or hospitals, and I have never seen the CEO of Woolworths or Coles sitting at the dispatch box on either side of the chamber.
The truth is that Woolworths and Coles are an important part of the Australian economy. As the Assistant Treasurer said, they control about 71 per cent of the food and grocery sector. IGA control about seven per cent and ALDI control about four per cent. The member for Kennedy actually talked about his position. He wants to divest, and the government intervened. I had a look at the policies on the website of Katter's Australian Party. There is a piece about this issue headed 'Fair Food'. It is less than a page and there is nothing there about the impact on jobs, on profitability of companies or on the impact on regional, rural and suburban communities. It is just a bold statement about what they might do, claiming:
… consumer prices are inflated, meaning higher grocery bills.
That is inconsistent with the reports, as the Assistant Treasurer has outlined.
I do not know where the member for Kennedy has been, if he has watched TV or received any of those brochures in his home, because competition is really quite strong, and you can see that. How much more does he want consumers to pay? If he wants to get rid of what he thinks is an oligopolistic practice, how much more does he want Australian consumers to pay for bread, butter, milk, cheese et cetera?
He also says he does not know how people actually get to the grocery stores or supermarkets. But the ACCC, in their 2008 grocery inquiry, found that almost 90 per cent of consumers living in metropolitan regions travel fewer than five kilometres to their regular supermarket. In regional areas—and I represent a regional and rural seat—consumers tend to travel further to do their supermarket shopping, with 23 per cent travelling more than 10 kilometres. I have 6,500 square kilometres in my electorate, and if you drive for five minutes in your car from my electorate office you get into cattle country. That is the truth. The truth is that rural and regional areas also want Woolworths and Coles.
I know from when I have done mobile offices in Esk, a rural community north-west of Ipswich, that they have been crying out for a Woolworths shop to be created there. I know that in places like Fernvale, Woolworths has acted as an incubator to attract more retail. When I spoke to the manager of the Ipswich Region Business Enterprise Centre of the Ipswich and West Moreton region, Tony Axford, he talked about the impact of those facilities and consumer outlets in those rural areas.
If you want to talk about why Woolies and Coles are important across the country, let me give you an illustration from my community. I represent Ipswich and the Somerset region. During the floods last year, we saw Coles in Ipswich decimated. One of the pictures many people in this place and listening on the radio would have seen was Coles decimated by the floods. All around that area we saw retail outlets like Ace Computer World suffer as a result of the loss of Coles. Coles are going to build a $25 million facility. It is going to be above the flood line and 350 people in the Ipswich area are going to get jobs. Does the member for Kennedy say that they should not do that? Should they divest themselves of that particular site and lose 350 jobs in that community? Does he want to damage the retail outlets in that area—the newsagents, the little shops in that area, Ace Computer World? Is that what he wants them to do? That is what he seems to be proposing.
What about Woolworths? He is critical of them. He claims, for example, that Woolworths and Coles control the major political parties. For many years, until very recently, I was on the state administrative committee of the Australian Labor Party in Queensland. I cannot remember Woolworths or Coles ever being mentioned at any stage. They are not an affiliated body to the Australian Labor Party's Queensland branch or to any other branch of the party across the country. The claim that somehow Woolies and Coles control the Labor Party—and I do not believe for a minute they control the Liberal Party or the National Party either—is not true at all. They do not.
The truth is that Woolies and Coles are an important part of regional and rural areas. I know how important they are in my communities, in the country towns and also in Ipswich.
I mentioned the flood. During the flood Woolies provided enormous help to my communities. Does the member for Kennedy propose, in respect of the mall site of the Ipswich CBD, that Woolies divest itself of that particular site? It is the anchor of the mall in Ipswich. During the flood, I organised—and Woolies did this—thousands and thousands of dollars worth of groceries, fruit and vegetables, household goods and cans and packages of food, including spaghetti, for flood evacuation areas in the Ipswich region. We had convoys of utilities and trucks going to evacuation centres at places like Riverview Neighbourhood House. Does he propose that we divest that? What is he suggesting for communities like Ipswich and Fernvale? We know these places are important. We know they attract business.
I will talk about Ipswich again and about the suburb I live in. Down the road from me in Flinders View we have an IGA at Winston Glades Shopping Centre. Less than three kilometres down the road, in the Yamanto Village, we have a Woolies. It is the hub of the Yamanto Village. About 200 metres down the road, along Warwick Road, there is an ALDI. They all exist there and they compete. I have lived in that particular part of Ipswich for about 27 years and I know that people in my community know they compete as they get the brochures.
Consumers make choices. They make choices about where they will go to shop. We do not live in a Stalinist economy, a command economy. Sadly, although the member for Kennedy seems to have the best interests of people at heart, somehow I think he would be happier in a command economy, even though he wants to say it is in the best interests of free enterprise. He is so critical of free enterprise and he is so critical of free trade. But these particular enterprises actually form the base of a community.
In the Yamanto Village, for example, right beside the Woolies there is a butcher and beside it there is a greengrocer. Seriously, what is he going to suggest about the impact on the greengrocer and on the butcher if you get rid of Woolies and they divest themselves of the site in one of the biggest suburbs in Ipswich? Is that what he is suggesting we do? I think it is nonsense. I have given those examples in my community to show the consequences and to talk about the 'beware factor' here as to the member for Kennedy's proposal. It is not thought through. That is all his policy document is about, with no dollars and sense, no thinking about the economic consequences in regional and rural areas, no thinking about the consequences for consumers and no thinking about the consequences for local jobs. It sounds good if you are in a pub up at Hughenden or somewhere like that but it does not work in reality. He knows it is not realistic. It is great publicity but it is not realistic. It is not good for jobs, it is not good for consumers and it is not good for communities like mine. (Time expired)
I rise to speak on the very important issue of supermarket power. While I do not support the member for Kennedy's remedy for the current situation, I am concerned—indeed the whole coalition of the National Party and the Liberal Party is concerned—about the capacity of the current situation to nurture a healthy competition. The one thing that without doubt is true is that a productive and efficient economy does need competition—fair competition. The market should be a dynamic system both domestically and internationally. However, the two systems are different. I think we are constantly challenged as politicians and as businesses by different sectors of the marketplace to get that fair and balanced system. However, quite obviously the Assistant Treasurer and the member for Blair believe otherwise.
There are pressures in the economy that are testing the capacity of current laws to support and nurture healthy competition. These pressures include the fact that there is a growing market concentration in key areas, the impact of dominant players on supply chains, the responsiveness of current laws or systems to deal with abuses of market power, and the effectiveness of mandatory codes. The horticultural code was mentioned earlier by the shadow minister. I have met with representatives recently and some of the people worried about that are from the member for Kennedy's own electorate. There is the accessibility and effectiveness of sanctions and remedies, and also the suitability of infrastructure access regimes, particularly for export orientated industries but actually more for domestic ones. It has become increasingly evident in the last couple of years that there is a lack of confidence in the system to provide balanced outcomes but, as you have already heard, the Labor government—in particular the Assistant Treasurer and member for Blair—do not believe that that is so.
It has been 20 years since there has been an objective, evidenced based assessment of how well our competition framework works. As has already been mentioned, obviously Professor Hilmer did not or could not contemplate that 20 years down the track there would be almost a doubling of the major supermarkets' market share. I guess he could not have anticipated that. In 1993, who might have anticipated that what were thought to be broad and inclusive prohibitions, such as those in section 46, on misuse of market power, would be read down and rendered almost useless when faced with practical examples of the muscle-flexing of a big business against a small business that occurs in our economy?
In the last two years there has been a very significant increase in traffic of processors and growers coming through my office door to highlight these issues and how hard it is for them to do business. Since then the $1 a litre milk price campaign has been introduced and retail prices are back to what has not been seen for 15 or 20 years. That has underlined that the system does need some rebalancing and, as the shadow minister has already said, we are committed to a review of what used to be the Trade Practices Act.
Dairy farmers, like the rest of the agricultural industries, have rightly highlighted that farmers are price takers in the economy and cannot pass any cost increases through to consumers. But, once again, the Labor Party do not seem, at the prime ministerial or ministerial level, to understand that farmers do not pass on cost increases, whether it is the carbon tax or anything else. The carbon tax highlighted their ignorance about processors and farmers. Minister Combet just last month claimed on ABC radio that farmers are entitled to pass on the cost increases of carbon pricing. His words were, 'But where there are costs incurred, it is valid to pass it through.' Is he that naive? Certainly the Prime Minister is. Twelve months before, when discussing the costs of the carbon tax on the dairy industry, she said on Adelaide radio, 'You will pass any additional costs through.' That highlights her ignorance. She said the same thing when it was mentioned to her that the carbon tax was being passed straight onto the cost of aviation fuel. When she was asked how those who muster and crop dust would be able to avoid it, she said, 'They'll pass it on, like everybody else.' This highlights the compound nature of the problem and the ignorance of the government to deal with it.
The coalition has promised a review of the Competition and Consumer Act, and that is something we will follow through. The current market has thrown up some interesting and surprising circumstances. You would expect, for example, that some of our agricultural industries production is dominated by a couple of big players and that that would give them more market power, but it has had the reverse effect. As there are only two supermarkets servicing 80 per cent of the market, some producers are too big to be able to sell to anyone except those two supermarkets. Whether it is tomatoes, mushrooms, eggs or dairy, they do not have any choice of competition beyond those two supermarkets, simply because they are too big for any other market.
Another issue not envisaged is the home brand issue, where supermarkets have the power to get superior shelf space. This is pertinent when dealing with the ability of a branded product to compete with a product of the supermarket itself. Nothing demonstrates the problem more than when you consider that broadacre industries like grain and meat, which are basically export based, do not have anything like the same problem that intensive domestic industries like horticulture and others have in dealing with supermarkets, because their market is really only within Australia. They have awful problems in dealing with the power of the big buyer, whereas the export based industries do not have to sell domestically; they have a far greater ability to go elsewhere.
There are some things we can do. In America, any significant movement of agricultural produce has to be reported, as to quantity and price, to the Department of Agriculture. There are penalties if that is not done. Whereas this in itself does not threaten the buyers or the consumer and it is in-confidence, it does give government power to know if there are competition issues involved.
We have committed to a review of the system. When industries, be they agriculture or otherwise, have to go up against far bigger markets, government has to make sure that competition is fair and equal. I respect the fact that the member for Kennedy has seriously and genuinely brought this issue before parliament. It is one that the coalition is dedicated to looking at. I do not agree with his solution but I do believe it is one we have to look at. I am sorry, as he is, that the current government is not willing to do that. We certainly acknowledge the problem and we are dedicated to dealing with it.
I rise to speak on this matter of public importance relating to supermarket competition, with a particular focus on the importance of maintaining lower prices for consumers. Much of Australia's economic history in the postwar decades is characterised by a somewhat unholy alliance across the major parties to protect producer interests at the expense of consumer interests. So much of the 'protection all round' that prevailed in the 1950s and 1960s meant that Australians paid high prices and that there was less foreign investment. We were less exposed to trade. Our firms were less competitive and our consumers suffered for that. One of the great achievements of the last generation of economic policymakers, thanks to people on both sides of the House, is that we have put the consumer first.
On the issue of food prices, I want to draw the House's attention to rates of food inflation. As it turns out, the series starts in 1974, when the member for Kennedy first entered politics. I note that in that year the rate of annual food price inflation was 20 per cent, and throughout the ensuing decades it has never been that high.
Rising food prices have never been a worse problem for Australia than they were at the time that the member for Kennedy began his political career as a National Party member in the Queensland parliament.
Indeed, if we look over the series of figures we can see that in the last two quarters—the March 2012 and June 2012 quarters—food price inflation has been negative. This means that Australians are paying less for the same food items than they were paying a year before. We should be celebrating this fact—it is a huge win for Australian consumers. We do not only see this with food prices; the past 20 years have seen real prices for imported furniture, handbags, clothing, shoes and medical products roughly halved, and prices of computers, telephones and other electrical goods have fallen by about two-thirds. To a large extent it is the opening-up of the market that has kept prices low across the board. Inflation was 6.7 per cent in the 1950 to 1985 period; since then, it has averaged just 3.7 per cent. The rise of China has been a major dampening force on global price inflation.
The matter of public importance today looks in particular at the role of supermarket competition and its price impacts. On this question it is worth referring to the ACCC's inquiry of July 2008 into the competitiveness of retail prices for standard groceries. The report notes, as the member for Kennedy has pointed out, that Coles and Woolworths account for approximately 70 per cent of packaged grocery sales in Australia and approximately 50 per cent of fresh product sales of goods such as meat, fruit and vegetables. But the report also notes:
There is little evidence to suggest that Coles and Woolworths have simply ‘bought out’ the competition.
Millions of Australian consumers shop at Coles and Woolworths in preference or addition to a number of alternatives—the local independent, the specialty bread shop, the Saturday market and/or the corner shop. High concentration levels alone do not dictate the nature of competition. There are other markets internationally that are more concentrated but appear to be more competitive.
It goes on to say:
… ALDI has been a significant influence on Australian grocery retailing. ALDI has forced Coles and Woolworths to react by reducing prices—specifically in States and localities where ALDI is present. Even if a customer does not shop at ALDI, they obtain significant benefits from having an ALDI in their local area or state, as the Coles and Woolworths stores price more keenly.
ALDI has now opened more than 250 stores across Australia. Costco has committed $140 million to ramp up its Australian operations. The government recognises that competition in the grocery retail sector is absolutely critical to making sure that Australians have a good range and cheap prices when they shop in their stores. It is important to constantly return to the facts when we are speaking about prices, not just of food and groceries but also of items across the board. Those opposite have been banging the cost-of-living drum but are unwilling to level with the Australian people about the fact that the inflation rate is the lowest it has been in the decade.
I am pleased in my own electorate to have opened the Bonner Woolworths, which is one of the smallest stores in Australia, and the Canberra Airport Woolworths, which is one of the largest stores in Australia. The Canberra Airport Woolworths will go head to head with Costco. It will have some of the cheapest prices available to consumers, and that means that Canberra families will find their household dollar going further. In Dickson, where there is now a Woolworths, there will soon be an ALDI, and the ACT government has opened up a space for a third supermarket to be determined in February next year.
We are introducing additional measures to bring more competition to the grocery retailing industry and to reduce barriers to entry; we are extending the timeframe for the development of vacant commercial land from 12 months to five years to bring new competitors into the market; we are clarifying the predatory pricing and misuse of market power provisions in the Competition and Consumer Act 2010; we are clarifying the operations of the mergers and acquisitions provisions in the act on creeping acquisitions; and we are introducing a mandatory, nationally consistent unit pricing regime, because we recognise that unit pricing allows Australians to shop around.
There are two schools of thought in this parliament on economic policy. There are those who largely support the market oriented, liberalising economic reforms of past decades, and there are those who are willing to go for the populist grab every chance they get. When the member for Kennedy left the National Party in 2001, it was the National Party of Tim Fischer and Mark Vaile, which was committed to these liberalising market reforms. We now see a struggle for the soul of the National Party, and frankly I think that the National Party is coming back after the member for Kennedy. We hear quotes from Senator Joyce that, for example, the carbon price would raise the cost of a leg of lamb to $100. This is the same Senator Joyce who gets his millions and billions mixed up; the same Senator Joyce who, as the member for Blair has pointed out, is in direct contradiction of the Leader of The Nationals on the issue of comparing farm-gate and retail prices for major grocery items.
We also see a struggle for the soul of the National Party in the current debate over foreign investment. I will be clear: I support foreign investment. It increases the number of jobs and increases wages in the Australian agricultural sector. I pay tribute to some of those opposite, who have been willing to be very clear about the facts in this debate. Former Treasurer Costello even has an opinion piece in the Sydney Morning Herald today making the case for foreign investment. If all Australia's foreign investors were to pull out tomorrow, we would lose one in eight jobs—one in eight workers are directly employed by a foreign owned firm.
So it is important to realise the fire the coalition are playing with as the Nationals return to the party of economic populism, rather than being the party of national interest as they were under Mark Vaile and Tim Fischer. The Leader of the Opposition seems to be flirting with the same tendencies. He said:
I have never been as excited about economics as some of my colleagues; you know, I find economics is not for nothing known as the dismal science.
Let me be clear why economics is known as 'the dismal science'. 'The dismal science' was the tag that Thomas Carlyle gave to economics because it held what he thought was the 'dismal' notion of racial equality. Frankly, I am happy to hold to the notion of racial equality, I am happy to be a practitioner of 'the dismal science' and I am happy to be standing on the side of consumers today.
I am pleased to speak on this matter of public importance. I was really interested to hear the Assistant Treasurer say that there is no problem and I am interested to note that none of the recent speakers mentioned the words 'producer' or 'farmer'. Obviously they have no idea and no interest. I am a dairy farmer and, as I have said in this House before, a proud one. I have had to deal with the very issue that is before us today. I know exactly what it is like to be the small cog in the big wheel, having to deal with a much larger market player. I put that on the table for members opposite who have not even mentioned producers.
I have real life experience, that is true, and I have very real concerns, as do the opposition, who have a willingness to work on this issue—the effectiveness of the competition laws in the current situation. We know that competition in Australia in the supermarket sector is paramount. It is important for consumers to keep the prices down, but it is also important for producers, suppliers and farmers because they need to be without the risk of being held to ransom.
We talk about market concentration and bottlenecks in business throughout Australia and the things which basically limit or restrict production. There is a real issue of dominant players in the supply chain through the retail level, which is really where market control is felt. We know about the two food retailing businesses which account for well over 70 per cent of the grocery market—which, by default, gives them extraordinary market power which is felt right down at the grassroots level.
In my experience, the use of this power has fallen on deaf ears at the ACCC. I know what the ACCC's job is, but what really concerns me is that part of its role should be to consider market forces. Surely you cannot maintain an effective supply if there are not commercial forces right throughout the supply chain. In my dealings with the ACCC, I found there was no willingness to deal with this issue or anything to do with market power. As dairy farmers, it is very real and in our faces. We are seeing this with the current issue, milk pricing. The imbalance of market power is felt right at the agricultural level and has been for a long time. The member for Dunkley acknowledged that there are problems and we are going to look at them.
I will never forget the first inquiry that I was part of. A supplier to one of the majors was so worried about the impact of Coles and Woolworths in the market that, to pass evidence on to me, he would meet me only in a car park in Perth where he handed over what were four breaches of the Trade Practices Act. Do you think anything was done about those? No. The ACCC did nothing.
The onus of proof which exists on a small business person like me is to give evidence. I went out and took statutory declarations from every dairy farmer I could get hold of about what was happening. Those statutory declarations all meant nothing as well. And this government says there is not a problem, that there is not an issue. There is a problem and there is a problem with the process as well.
I remember fronting up, as a member of Dairy WA and as a farmer, to the ACCC and saying, 'We really need to develop a milk negotiating agency in Western Australia where it is such a small industry and there are so few farmers.' I remember the absolute contempt with which I was held when I sat in that inquiry with the ACCC on the other side of the table and with 300-odd dairy farmers at my back. They said, 'We're pretty disappointed in the application you've made. We were expecting an application along the lines of what we have had from Air New Zealand and Qantas on a previous matter'—and they were dealing with a group of dairy farmers! Yet those on the other side of the House say there is not a problem, that there is not an issue. I am here to tell you that there is.
Even at recent Senate inquiries there were those who supply the supermarket sector who were not able to give evidence because the very nature of the information they would have given would have identified the contracts they have and they are concerned about retaliation. The concentration of the market gives the large market players power as to whether or not businesses survive. That is what we are dealing with here. So we have some producers who will not front up. It is very difficult to get to the heart of the problem when the very weight of market concentration and market power prevents that from happening.
In the Economics Committee report The impact of supermarket price decisions on the dairy industry we see a statement by National Foods that margins on Home Brand milk are close to zero, with overall profitability on their milk sales, including generic and branded milk, at approximately two per cent.
I would really like to know—and I have asked this question previously—whether there is any cross-subsidisation between the price being paid for generic milk and the price being paid for a branded product. This is just an example. We have heard from the other side that there is no problem, but I would say to you, put yourself in my position. I am a dairy farmer with a perishable product. I do not have a choice to store this product and be able to sell it where and when I like, to whomever I like. There are limited buyers. There are two major supermarkets that buy the product that I have via a processor. But my milk has to be picked up every day. Let me tell those of you who might be thinking maybe there is an issue at the grower level—no, there is not. We have some of the most efficient dairy farmers in the world in Western Australia and they are producing some of the best quality milk in the world most efficiently. So, that is not the issue and yet they are struggling to stay in business.
We have seen the impact of that $1 milk, and we saw it quite strongly in Queensland—the impact was direct and immediate. I look at my fellow dairy farmers and it bothers me—and I know it does not bother the other side—that we are seeing an exodus of great young people with incredible intellectual property built up over generations out of a great industry. There is no value in that from the other side, and so there is no problem. I am here to say that there is a problem, and I am really pleased that we on our side are prepared to look at this and deal with this issue. That is what the member for Dunkley said directly when he was here.
One other thing that bothers me is that we have a National Food Plan, released by the other side, and yet there is no mention of producers or producer viability. It ignores the price-taking nature of the industry—the fact that there are few buyers and market concentration. It ignores the extreme vulnerability of the grower and the small business person. That is what we are as farmers and producers—we are small business people and we are operating in a market where there is market concentration and associated market power.
As I say, when you get those who cannot afford to give evidence because they are scared of retaliation and those who choose to meet me to pass on some information but will only meet me in a car park in Perth, then we do have a problem. I am pleased that on this side of the House we are prepared to look at that problem in a genuine sense. I have fruit growers say to me: 'The price that I am getting currently is barely covering the boxes that I am packing the fruit in.' Those on the other side have said to date that there is not a problem. Well, you try putting yourself in the position of being the price taker at the bottom of the rung—the small business person—and see if there is not a problem with this whole process.
I congratulate the member for Kennedy for raising the topic of supermarket competition for discussion this afternoon. Everyone who has made a contribution has been very sincere—the member for Kennedy talking about his potato farmers, amongst others; the member for Forrest talking about her dairy producers, in particular; and the member for Fraser advocating very strongly on behalf of consumers. This is the very nature of this debate: the argument on the side of the producers, who are obviously doing it tough, and the argument on the part of consumers, who benefit from low prices and very competitive arrangements.
There is no doubt, though, that there is something wrong. Sometimes the evidence is hard to find, but producers are doing it tough for a whole range of reasons—including drought and oversupply in a particular industry. For example, we have an oversupply in the wine industry in my electorate because of excessive planting of vines. The list goes on and on, but life on the land is particularly tough. I was just having a conversation with the Parliamentary Secretary for Agriculture, Forestry and Fisheries on this very issue.
I was elected into this place in 1996 and in 1999 I was delighted when the Howard government established the Joint Select Committee on the Retailing Sector. It came after enormous pressure from the National Association of Retail Grocers of Australia, who represent the independent supermarkets and were concerned about the growing market power of Coles and Woolworths. There are a number of factors in this debate. One, of course, is that we do have a very high market concentration in this country of somewhere between 70 and 80 per cent, depending on the subsector you are talking about—whether it is fresh fruit or other goods. There is no doubt about that, even though we have had the injection of Costco and ALDI into the marketplace. That has been very welcome. Market concentration remains very high, but it is a bit like comparing apples and oranges when you compare Australia with our 22 million people with the United States where there are in excess of 300 million people. The second matter of fact is one I have already mentioned, and that is that farmers are doing it tough. There is no doubt about that.
The third fact is that consumers are enjoying, generally speaking, lower prices. The fourth is that, when you have a look at the annual reports of Coles and Woolworths, you will find that the shareholders are enjoying a return of between six and seven per cent, which challenges the idea that because of their monopsony power—their purchasing power—Coles and Woolworths have a licence to print money. It simply is not true. Unless those two organisations are charged with lazy inefficiencies, you ask yourself: are they benefiting at the expense of rural producers? I do not know the answers, and no one has really proffered any logical answers here this afternoon. But it is a debate that we need to keep having in this place. There is too much evidence of people in the agricultural sector doing it tough, partly because of the market power of the likes of Woolworths and Coles.
In 1999 we had that inquiry. I went into it very enthusiastically with the interests not only of producers but also of the smaller players in the retail sector in mind and determined to do big things. We did do a few things: we recommended and had adopted some reasonably modest changes to the Trade Practices Act, to the capacity of rural producers to bargain collectively and an amendment to section 50, which allowed the definition of a market to be extended to a regional market. There were changes to section 46 of the Trade Practices Act—that is, the abuse of market power. They were not large but they were changes nonetheless. We got an industry code of conduct and we got an ombudsman. The list goes on and on. It is evident, given some of the concerns being expressed by members from both sides, that not much has changed.
In my own electorate, I get so frustrated with the plight of those in the dairy industry, but there are myriad reasons why the dairy industry is doing it tough. I get particularly frustrated by the plight of my vignerons, who cannot sell their wine at the cellar door these days more cheaply than Dan Murphy's in Sydney can. Whereas once upon a time Sydney residents took a drive to the Hunter for the unique cellar door experience and for some cheap wine, they can now buy it more cheaply in Dan Murphy's in Sydney, in their home town. Nothing illustrates better than that the sheer market power of the Coles and Woolworths of this world, which represent about 80 per cent of the liquor market. I talk to people in this place all the time and to producers all the time—I listened to the member for Kennedy this afternoon—and I ask: what is the solution? No-one this afternoon offered any. No-one in my electorate offers one either. Divestiture is possible, actually, following some changes to the Trade Practices Act. The ACCC does have the capacity to force divestiture in the event of a very deliberate abuse of market power.
If it has been changed, I acknowledge that; I did not know it. I do know that no-one really acted upon it when it was in place. It did not work. There are shareholder interests too, of course. Tell the shareholders of Coles and Woolworths that the government is going to move in and force their company, the company they have invested in, to divest itself of part of its operations. Again, we have very significant competing interests.
We do have a problem, and I acknowledge that. I want to be part of the process of working towards some assistance for these industries. I am thankful that the parliamentary secretary was in the House when I arrived, because he was able to confirm that about 60 per cent of our agricultural output is exported. It is hard to argue that the impact of the monopsony is huge on our agricultural sector when the real market for our agricultural sector is our export markets, where the power of Coles and Woolworths is not relevant.
The best way that government can assist the agricultural sector more generally is of course in innovation, export assistance and opening new markets in areas where they are not necessarily subject to the monopsony power of the Coles and Woolworths of the world. I acknowledge that many of my agricultural producers, including wine producers, are doing it tough, but the answers are very hard to find.