Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

It is good to touch base again with something I touched on in my maiden speech and to continue to pursue that issue. So I rise to speak on behalf of small businesses and consumers, who are being stymied by the market power of the big players in the retail market, and of the inherent unfairness that small business has to deal with by reason of only one thing: the ever-growing dominance of big business, especially big oil companies, big retailers and big retail space conglomerates.

One of the fundamental freedoms in a free society is the ability to go into business, to be your own boss, to have the closest possible connection between your exertions and your reward and to be independent of the threat that your opinions could affect your promotion, which is always part of working for someone else. The stronger the small business sector, the more vibrant, diverse and resilient the economy. The stronger the small business sector, the higher the potential freedom for all. The economy must have new seedbeds of entrepreneurship provided by small business or it will stagnate with the status quo. Centralisation of the economy brings centralisation of opinion, opportunity and wealth. The great inhibitors of small business are government overregulation and mismanagement, a militant industrial relations environment and the aggressive actions of participants with excessive market share.

It is this final issue of excessive market share which I wish to address in this speech, as it appears to be ignored in the political debate. If you are a big business with excessive market share, you are able to sustain a campaign that puts your smaller competitors at risk by reason of your control of the supply lines of vital inputs such as rent, produce or labour. Big business imposes concessions which the market must recoup from smaller competitors through their lower returns. When businesses, by their size alone, are an implicit threat to competitors then the market is imperfect, and evidence of this is emphatic.

All markets have regulation, whether it is occupational health and safety standards, zoning or tax laws. Inherently, these laws favour one player over another. Typically, it is the bigger player who gets favoured. A workplace health and safety officer in a workforce of two is impossible to pay for; in a workforce of 1,000 it is unnoticeable to the bottom line. Because a truly free market is an anomaly and does not exist, there should be no issue about having regulations to ensure small businesses get a fair go when it is obvious that they are being discriminated against. The United States leads the way on this and has strong trade practices laws that include the Sherman act, the Clayton act and the Robinson-Patman act. The current proposed sale of Coles and its likely purchase in part by Woolworths would exacerbate the excessive market powers that Woolworths currently has, and this should not be allowed to occur.

Let us look at some practical examples of what is happening and why the Trade Practices Act needs urgent strengthening to provide better checks and balances on market power. Take, for instance, the meat price comparison survey conducted on 16 December 2006 in south-west Sydney by the Southern Sydney Retailers Association. Their research dispels the myth that bigger is cheaper and just being cheaper is enough to survive if your competition is massive.

Coles and Woolworths’ prices on a selection of meats were, on average, an astronomical 29 per cent higher than those of the independent retailers at Lansvale. I will give a couple of examples to give muscle to the argument. Blade steak was selling at $7.99 per kilogram whereas at Woolworths consumers were being charged $12.99 per kilogram. The independent was selling the family favourite, beef stir-fry, at $12.99, while Woolworths had it at $18.99. Playing devil’s advocate, one might say that the independent was a boutique, high-quality butcher. Well, let’s look at the onion and the granny smith apple. The local independent at Casula sold the brown onion at $2.99 a kilogram, while Woolworths was selling it at $3.67 a kilogram—47 per cent more. The granny smith apple sold for 50 per cent more.

These are clear examples of why overcentralisation of the retail market is exploitation of competition. Ultimately, it leads to exploitation of what is left after small business goes—the consumer. Since 1990, food prices in the ‘big two’ dominated supermarket sector have risen more than 70 per cent. In the UK, where there are more players in the retail grocery sector, prices at the supermarket rose just over 30 per cent in the same period. The true scandal of this situation is that in the last 10 to 15 years in all other developed countries food price inflation at the supermarket has been less than general inflation. In Australia, supermarket food prices have risen around 18 per cent more than inflation. In contrast, in the UK, food price rises are well under inflation.

Let us take another essential grocery item: milk. Since 1991, the farm gate price of milk in Australia has moved in line with all other major international milk producers. Our farmers are obviously efficient. So why have our retail prices increased by 90 per cent since 1990? In comparison, Canada’s retail milk prices have risen just 51 per cent and the UK’s 60 per cent.

Another common beverage that finds its way into shopping trolleys is Coca Cola—despite what you may think of it. The American Chamber of Commerce Researchers Association cost of living index survey in Oklahoma in the US found that, for the first quarter of 2005, the average price for a two-litre bottle of Coke in supermarkets in downtown Ardmore was US94c. That equates to $1.30 in Australian terms, including GST. The Southern Sydney Retailers Association compared Coke prices in Australia to those in Canada, where it found that the supermarket chain Shoppers Drug Mart were selling a two-litre bottle of Coke for $Can0.88. This equates to $A1.15 including GST. Woolworths occasionally reduces the price of Coke as a ‘special’. A supermarket price here of $2.96 for a two litre bottle of Coke is not special—it is extortionate. And they can get away with it because they have no competition. Something is wrong.

No wonder private equity firms think Coles is a good buy. They must think they have stumbled across a real gem. We need laws strong enough to encourage competition against the large players and to protect small business. The ‘big two’ retailers further increase their profits through the sweetheart deals on their rents that they enjoy in large shopping complexes—another overcentralised market—handicapping their smaller competitors. You will see from the graph I have here, Mr President, the difference between the rent of the majors and of their competitors.

Here are some examples of these sweet rental deals. At Westfield Liverpool, Coles pays just $245 per square metre per year while Bush’s Meats in the same complex pays a whopping $1,338 per square metre. This is not an isolated example. At Westfield Parramatta, Woolworths pays $218 per square metre versus $1,529 per square metre paid by Prime Quality Meats. At Castle Towers, in Sydney’s north-west, Coles pays $187 per square metre while Farm Fresh meats pays $1,932. How can other meat retailers bring competitive pressure to bear when they are paying up to 10 times more rent per square metre?

Today retail rents for small retailers are an unbelievable 125 per cent higher in Australian shopping malls than they are in US malls. In 51 major regional shopping centres throughout Europe, the average rent for small retailers is $454 per square metre when converted to Australian dollars. This compares extremely unfavourably with the average of $1,167 charged to small retailers by Westfield in Australia—a massive 157 per cent difference.

Let us turn to Chinese-made clothing and footwear. Australians pay between 33 per cent and 115 per cent more for popular sports shoe brands such as Arvee, Kallin, Ascendor, Nike and Adidas. Australians wanting to buy Calvin Klein underwear will pay 58 per cent more at Myer in Toowoomba than at Macy’s in New York. Maybe this says a lot for Myer in Toowoomba—I will have to go there; I expect to see gold door handles. I think it has a lot to do with lack of competition. If they do have competition, they tie their supply lines up.

While Australian tariff protection has been reduced, supposedly to lower prices, we have found in many cases the opposite has occurred. Since 1990, clothing and footwear prices in Australia have jumped 10 per cent while in the UK they have fallen 15 per cent and in the US they have dropped 12 per cent. They have done this without the tariff reductions we have seen in Australia. Surely our smaller domestic market does not account for price anomalies as drastic as these? Maybe this can be accounted for by the tyranny of distance. Not so. Shipping costs from China are lower to Australia than they are to the US.

I could give many more examples, but this is a snapshot of how corrupted our retail market has become and how inadequate the Trade Practices Act is to deal with the market power of the big players. My fears are further exacerbated by the private equity takeover of Qantas by a consortium that includes Macquarie Bank. Australia’s inadequate trade practices laws mean there is nothing to stop the Macquarie owned Sydney airport from offering price discrimination to Qantas at the expense of other players.

The sort of unethical and anticompetitive behaviour identified through the hard work of the Southern Sydney Retailers Association needs to be addressed. I am sure the evidence they have unearthed applies across Australia. Australians are being exploited by the bigger players in the food and retail sector. I am renewing the calls that I and others in the National Party have been making for a strengthening of section 46 and section 51AC—(Time expired)