Supermarket inquiry an abuse of Senate power

The Greens-led Senate inquiry into supermarket prices was a display of political theatre and abuse of parliamentary resources.

Senator Nick McKim during questioning of Woolworths chief Brad Banducci. Picture: Martin Ollman

The Greens-led Senate inquiry into supermarket prices was a display of political theatre and abuse of parliamentary resources and a classic example of not letting the facts get in the way of a good story.

We are living in an environment of high inflation and governments still recovering from the debt binge necessitated by Covid-19. The socialists love to blame business for our problems with no recourse to the evidence.

I have not heard a sensible word about the impact of high electricity costs, which are clearly due to the mismanaged energy transition. The high cost of electricity has also contributed to the dismantling of our manufacturing and our heavy reliance on offshore supply lines. Manufacturing in NSW has plummeted to only 4 per cent of gross state product.

When Senator Nick McKim announced the inquiry into supermarket pricing in December 2023, he stated, as fact, that Coles and Woolworths were making billions in profit by price gouging, and that the inquiry would find a way to bring grocery prices down. The inquiry heard no evidence of price gouging. To the contrary.

It heard the major supermarkets are making sub-3 per cent profit margins, and the little profit they do make is distributed to their shareholders (including many superannuants) and reinvested in their stores.

The committee was not interested in gathering information relevant to easing cost-of-living pressures. It was more about “gotcha” moments and dramatic sound bites.

McKim’s unedifying pursuit of the most acceptable measure of a supermarket’s profitability – return on equity – was to kick an own goal of comparing supermarkets to our “rapacious” big banks. These are the same banks who got us safely through the global financial crisis and were rewarded with a royal commission.

The committee’s leadership was also not genuinely interested in hearing from multinationals, which are the supermarkets’ largest suppliers. This is despite the fact that they were included in the terms of reference. Multinationals account for more than half the big supermarkets’ sales, so their role in food price inflation needed to be examined.

According to Woolworths’ submission to the Review of the Food and Grocery Code of Conduct, its largest 100 suppliers are responsible for approximately 80 per cent of all price increases.

As I say, never let the facts get in the way of a good story.

Had the multinationals appeared, it would have discredited the theory that “for too long the big supermarkets have had too much market power”.

The supermarkets count Nestle, Unilever, Pepsi and Procter & Gamble, with market capitalisations of between $150bn and more than $580bn, among their largest suppliers. It is difficult to understand how Coles and Woolworths, with market capitalisations of about $21bn and $37bn respectively and operating in a relatively small market, could wield more power than those global behemoths.

The committee, however, was at pains to highlight the bullying and intimidation waged by Coles and Woolworths against its suppliers at the smallest end of the chain. I note Coles told the inquiry that none of the suppliers that identified themselves at the inquiry were direct suppliers to Coles. That fact was not highlighted.

The inquiry also failed to examine the role of aggregators – large suppliers and wholesalers that buy from small farmers and are an integral and powerful part of the supply chain. The so-called middleman.

An uncomfortable truth for the committee is that Australians benefit tremendously from the economies of scale that Coles and Woolworths have. Whether you are in Port Douglas, Whyalla, Karratha, Perth or Tasmania, the price of core staples such as milk, pasta and rice is the same despite transport costs.

This committee highlights the extraordinary abuse of the political process that is now commonplace in Australia.

Ignoring the external factors that may be affecting the economy, such as war or disease, some politicians seek to deflect attention from their own shortcomings by using their powers to call businesses and corporates to kangaroo courts designed to create pictures and sound bites for social media to blame business for all our woes. This does nothing to generate better policy outcomes.

Such inquiries have become a farce and an appalling waste of taxpayers’ and business time and money, with next to no outcomes.

Tony Shepherd is a former chair of the BCA and National Commission of Audit.