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Grocery prices too high? Victorian Greens want to freeze them too
Victoria needs to introduce price controls on food and other everyday supermarket items to combat the rising cost of living, the Victorian Greens say, despite criticism from economists and the UK abandoning a similar plan earlier this year.
The Greens are threatening to run a fresh cost of living campaign and seek an upper house inquiry into grocery prices just days after failing to convince the Andrews government to cap the price of rent as part of last week’s housing overhaul.
The minor party has for months been calling for a rent freeze both nationally and in Victoria. But Greens MP Sam Hibbins has denied his party is looking for a new populist catchcry.
“The rent control campaign is not going away by any stretch of the imagination,” he said. “People are crying out for direct government intervention. What we’re talking about is price controls on food and groceries with a focus on profiteering supermarkets. So whether it relates to our policies on rent or bill freezes, it’s entirely consistent with our economic approach.”
The price of some supermarket items increased by as much as 40 per cent in the 12 months to July this year, research from Deakin University found.
By the end of the financial year, food inflation had outpaced overall inflation, while Coles and Woolworths announced profits of $1.09 billion and $1.6 billion respectively.
Tania Clarke, policy director at the Consumer Action Law Centre, said she had seen a spike in referrals from Victoria Police because people were resorting to shoplifting to feed their family.
“People are desperate,” she said.
Disputes over supermarket prices – but not setting them – have long been the domain of the Australian Competition and Consumer Commission, a national watchdog. However, Hibbins argues Victoria has several powers at its disposal to enforce supermarket price controls, and has done so as recently as the 1980s.
The member for Prahran said the state government could declare groceries a regulated industry, allowing the Essential Services Commission to set prices.
“So that’s bread, dairy, cooking needs, meat, even personal care products,” Hibbins said. “Alternatively, they could introduce their own legislation.”
Greece last year forced supermarkets to reduce prices on basic products, and Hungary followed suit this year. But the UK abandoned plans for voluntary price controls in June following a backlash from retailers.
University of Canberra economics professor Phil Lews said supermarket price controls were never a good idea.
“It’s the sort of thing students learn in Economics 101,” he said. “Price is determined by supply and demand. If you try to cap the price, it’s going to lead to a shortage. The price of other items will go up. It’ll be inflationary for most people.”
Grattan Institute chief executive Danielle Wood agreed.
“We are much better offering direct support to the most vulnerable, for example recent increases to JobSeeker, to help manage the cost of living pressures than this heavy-handed form of intervention.”
Melbourne University professor Allan Fels, a former chair of the ACCC, also doesn’t support direct price controls on bread, milk and other items.
“I do think there is a case for having well-informed surveillance and exposure of overpricing in particular cases, similar to when the Howard-Costello government introduced such policies when the GST was introduced in 2000,” he said.
Treasurer Tim Pallas previously accused the Greens of wanting to create a “command economy”.
“We do not see a role for the state to fix prices,” Pallas said on the floor of parliament last month. “[The Greens] want to cap – they want to freeze – rents. Imagine what that would do to investment in our housing stock? It would be disastrous.
“I can tell you the same would occur were the espoused views of the Greens political party to be applied to broader cost of living issues.”
So, what does Hibbins have to say to the naysayers?
“There’s always going to be those who will say you can’t disrupt the market because this is going against economic orthodoxy,” he said. “But the strategic use of price controls is both an effective and credible tool. The government is stuck in a neoliberal policy straitjacket.”
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clarification
This article has been updated to include additional information about the role of the ACCC.