How far will Treasurer Jim Chalmers go to reform rising consumer prices?

Treasurer Jim Chalmers is using the ACCC for his supermarket prices inquiry.

Treasurer Jim Chalmers will this month get his department’s blueprint on ACCC merger reforms in the wake of his claimed productivity credentials and blatant use of the agency for political purposes like the supermarket prices inquiry.

This week Competition Minister Andrew Leigh laid down the case for reform in a speech to the Chifley Research Centre and the ACCC weighed in on Friday, releasing its submission ahead of the cabinet decision.

“Productivity growth and living standards rely on competition, which is why it is central to our economic agenda for building a stronger economy and a fairer society,” Leigh said.

Merger scrutiny is not the only way to boost competition but once competitors combine the incentive to lower prices, boost investment spending and research funding diminishes.

The only sure beneficiaries are company management – with shareholder returns mixed – and the known losers are consumers.

The trouble is the latter group, while bearing the brunt of the risk, don’t immediately recognise the dangers.

Of the 330 or so mergers assessed each year, over 90 per cent are cleared in a second. Just half a dozen are reviewed closely and a smaller percentage are either rejected or withdrawn in the face of likely rejection.

Three key reform proposals have attracted most attention: an attempt by the ACCC to increase its control by limiting appeal rights to materials and arguments presented first to the regulator, a new test of whether the ACCC is satisfied there is no lessening of competition (rather than having to prove there is a substantial chance), and compulsory notification of all mergers over a $30m threshold.

All three are opposed by big business and their competition lawyers (the mafia) but the notification mandate, as adopted in many overseas jurisdictions, has split the profession and is likely to be approved – maybe with some modification on the threshold with an increase in the level and requirement that it be linked to Australia.

The lawyers say the ACCC is seeking a reversal of the onus of proof on mergers. The ACCC puts it differently, arguing as merger clearance is an exercise in forecasting the future the issue is who should bear the risk: consumers (the national economy) or deal company management and their advisers.

This month, the Competition Tribunal is also due to hand down its decision on whether the ACCC was right to block the ANZ-Suncorp merger, relying solely on the arguments presented to the ACCC.

If this comes before the government reform decision, depending on the outcome, it will be used by both sides are either evidence no changes are necessary or the need for better rules.

The regulator wants the same rules on evidence for all mergers, which the mafia thinks smacks of the ACCC increasing its control over the process and argues should be blocked.

Some argue the ACCC should be more open on what information is required, and so the debate proceeds.

Leigh and the ACCC have laid down the case for reform, the issue now is whether Chalmers and the cabinet are willing to do more than talk about competition reform.

Sturt Krygsman illustration of Chris Bowen

Bowen’s BlueScope bounty

Last year BlueScope boss Mark Vassella talked of the company’s resilience as he unveiled a $1bn profit, 14.6 per cent return on capital, $518m in shareholder returns and board approval to proceed with the $1.2bn reline of the No 6 blast furnace at Port Kembla.

Explain then why federal Climate Minister Chris Bowen felt the need to transfer

$136.8m of taxpayer funds towards the reline and upgrade of its No 6 blast furnace to prolong coal and iron ore based production.

BlueScope is indeed “actively exploring options for the longer-term, large-scale decarbonisation of our operations, in particular the production of iron from direct reduced iron (DRI) technology”.

But the blast furnace reline has zero connection to so-called “green steel”.

Bowen said “this project will maintain domestic production, reduce emissions, and support pathways to producing even lower-emissions steel in the future”.

Big call – how exactly, and what a woeful waste of taxpayer funds to fill monopoly profits to support commitments made a year ago.

Sanjeev Gupta has had his financial issues in his global empire but Bowen also eased the burden a touch by transferring $63.2m of taxpayer funds to the committed purchase “and commission of a low carbon electric arc furnace (EAF) to replace the existing traditional blast furnace at the Whyalla Steelworks.

Bowen confided “hard-to-abate sectors like steel” are necessary “so Australia can keep making the things that are vital to the energy transition, including electricity and rail infrastructure, like wind towers, solar farms and energy transmission, and the construction of energy efficient buildings.”

The monopoly flat and long product steel concerns have long been recipients of government handouts on top of accounting for 80 per cent of dumping based protection and now thanks Bowen yet more taxpayer-funded subsidies.

Pay dirt

Corporate demand for soil carbon projects is stronger than supply with farmers weighing up the benefits against long delivery times with up to seven years between the first measurement and the award of lucrative carbon credits.

Positive steps like last year’s grant of 151,312 carbon credits to two Queensland-based farm clients of Terry McCosker’s Carbon Link underlined the potential.

McCosker’s projects now have a combined 250,000 ACCUS under management with more under final audit, showing the benefits from projects which have been in the making since 2016.

Phillip Mulvey’s Ryzo Sydney Uni-based technology halves the administration costs for farmers which breaks down some barriers.

Data transparency and verification requirements are some of the issues along with overstated claims by some practitioners

The establishment time involved and weather variations are also cited as farmer concerns even though the regenerative farm practices involved have also shown to be beneficial for micro climate management supporting multi-income farms.

Better farms and more carbon generation.

The McCosker farm management practices added a massive 200,000 tonnes of water-holding capacity through better soil conditions.

Companies like oil giant Shell is an active participant in the new trend by buying farms through third parties which keeps its name in the background while controlling active farm projects.

AgriProve’s Matthew Warnken is in the US this week trying to finalise a $30m funding deal as he also works with CSIRO-backed Ceres Tag, which has an animal tagging program to help support farm management.

Warnken also has a stake in early pioneers Corporate Carbon, which back in the 2017 financial year contracted to sell forward 18.2 million tonnes of carbon delivered over 10 years at $11 an ACCU.

The soil carbon projects have yet to generate meaningful issuance but the carbon contracted can be delivered through other methods like savannah burning and human induced regeneration.

This helps offset what would otherwise be a significant contingent liability.

Mitsubishi, Mitsui, Beach Petroleum and Woodside are other active participants.

McCosker told The Weekend Australian that “the benefit of soil carbon farming is the production of carbon-negative beef, including the impact of methane gas production, through practices which also produces more soil water conservation and more resilient farms”. One tonne of beef (about two cows) sequents 10.6 tonnes of carbon, according to McCosker.