ACTU launches price gouging probe as bosses hit out on profiteering claim

An inquiry into price gouging has been met with fierce resistance from employers as debate rages over the cause of Australia’s surging inflation.

A fresh offensive against big business has been launched by the Australian Council of Trade Unions after it established an inquiry to expose price gouging behaviour by corporations.

Taking submissions from consumers, small business, academics and think tanks, the inquiry will be led by former competition tsar professor Allan Fels who was the inaugural chair of the Australian Competition and Consumer Commission (ACCC) between 1995 and 2003.

“In a cost-of-living crisis, price gouging has real consequences. Those affected by this deserve an opportunity to express themselves alongside debate on potential policy solutions,” professor Fels said.

“It’s time to take a serious look at what is a serious problem, does Australia have a price gouging problem and if so to what extent?”

Former chair of the ACCC professor Allan Fels will lead the ACTU’s inquiry. Picture: NCA NewsWire / Ian Currie

ACTU secretary Sally McManus echoed his comments, saying price rises had hit Australians at every turn and their cause deserved to be investigated.

The inquiry is the latest development in an ongoing tussle between employers and unions over who is to blame for exacerbating the nation’s inflation crisis.

The probe has already been met with fierce opposition from the business lobby, who have labelled the inquiry as ‘ludicrous’, and based on “myths, misstatements, and misconceptions”.

Business has pointed the finger at unions’ wage claims as aggravating price pressures. Conversely, unions have accused big business of adding to cost of living pain with corporate profiteering.

Economic institutions, like the Reserve Bank and Treasury, have also weighed into the wages vs. profits debate. Picture: NCA NewsWire / Nicholas Eagar

The Reserve Bank and Treasury have also weighed in on the heated debate, with the central bank finding that there was “little evidence” that there had been a broad increase in the profits outside of the mining sector.

“Changes in domestic profit margins have not been a significant independent cause of the increase in aggregate CPI inflation,” the central bank stated in a note published earlier this year.

“If rising domestic profit margins were a significant independent driver of inflation, profits would instead have increased significantly relative to labour income over the past year.

“The profit share has, however, been broadly stable across most industries over the past year.”

BCA chief executive Jennifer Westacott said reducing the cost of doing business, rather than an inquiry, was needed instead. Picture: NCA NewsWire / Gary Ramage

The Business Council, which represents some of Australia’s largest corporations including Coles, Woolworths and the Commonwealth Bank, pointed to the need for competition and regulatory reform to drive down input costs, and therefore reduce final prices.

“The key to lower prices and ballooning costs of living is increasing the competitiveness of our economy, reducing the cost of doing business and removing the sea of red tape on small business,” the council’s chief executive Jennifer Westacott said.

Australian Chamber of Commerce and Industry chief executive Andrew McKellar slammed the proposal, arguing that the peak union body was unfit to conduct such an inquiry.

“The union movement is not known for its tolerance of a diversity of opinion. How will it accept any outcome other than that which it wants?” Mr McKellar asked.

“The experts at Treasury and the Reserve Bank have already examined claims of profits causing inflation and rejected it.

Chamber of Commerce head Andrew McKellar opposed the proposal, arguing the findings would be predetermined. Picture: NCA NewsWire / Gary Ramage

Pointing to the analysis from the Reserve Bank, chief executive of national employer association Ai Group, Innes Willox, argued that the ACTU’s claims of corporate profiteering failed to stack up.

“The ACTU’s price gouging rhetoric, among many of its other claims, is based on myths, misstatements and misconceptions,” Mr Willox said.

Recent analysis released by the Organisation for Economic Co-operation and Development (OECD) in June, which the ACTU regularly cites, showed that as inflation accelerated in Australia early last year it was profits, particularly from mining and energy companies, that forced price increases.

The OECD’s analysis also showed as inflation peaked at 7.8 per cent in the December quarter, profits and labour costs contributed to price increases in equal amounts.

Other central banks around the world have also expressed the view that prices have been a significant factor in driving up prices. In June, Christine Legarde, president of the European Central Bank stated that corporate price gouging was the primary driver of higher prices.

“Unit profits contributed around two-thirds to domestic inflation whereas, in the previous 20 years, the average contribution was one-third,” Europe’s top central banker said.

ACTU Secretary Sally McManus said that source of Australia’s price pressures required investigation. Picture: NCA NewsWire / Nikki Short

While employers expect the outcome to be predetermined, any evidence of price gouging by business will likely be seized upon by the union movement to further pressure the government to tighten competition rules.

ACTU secretary Sally McManus said that soaring cost of living warranted the union’s inquiry.

“Working people are feeling this every day at the checkouts and when the bills come through the door.”

“It’s only right we take a look to see what’s fuelling these rises and what can be done about it,” Ms McManus said.

The inquiry will make findings and may make recommendations to the ACTU on policy solutions to limit future price gouging.

Originally published as ACTU launches price gouging probe as bosses hit out on profiteering claim