An expert has warned ‘s middle class is slowly disappearing while the wealthy are becoming richer due to the cost-of-living crisis.
Associate Professor of Law at the University of Wollongong Andy Schmulow, 54, argued everyday ns were being forced to spend more on necessities.
Meanwhile, bloated corporations were getting richer as they were not motivated to bring down prices because there was little competition.
‘We have widening wealth disparity in because of the cost-of-living crisis,’ Prof Schmulow told Daily Mail.
‘It’s causing those who don’t benefit from the cost-of-living crisis to get poorer, and those who do benefit from the cost-of-living crisis to get fabulously wealthy.
‘That cost-of-living crisis is being driven by a lack of competition in a whole range of critical markets.’
When Aussies think about their everyday expenses, the quickest to pop into most people’s minds is groceries.
A report from the n Competition and Consumer Commission (ACCC) earlier this year found Coles and Woolworths, ‘s supermarket giants, are among the most profitable grocers globally.
‘The executive management of Coles and Woolworths are getting six-figure salaries thanks to the fact that they are running what the ACCC determined are among the most profitable supermarkets in the world,’ Prof Schmulow said.
‘The reason why Coles and Woolworths are now some of the most profitable supermarkets in the world is because they have no competition – they’re a duopoly.
‘It is well understood in economics that if you don’t have enough competition, prices will go up.
‘We used to have lots of supermarkets in – Coles, Safeway, Franklin, Barlow’s. Now we have a supermarket duopoly, ColesWorth.’
Prof Schmulow highlighted the chains’ staggering returns shareholders receive.
‘Supermarkets in Europe have an average return on equity of 0.7 per cent and in the United States they have an average return on equity of 1.4 per cent. Coles’ return on equity is upward of 30 per cent,’ he said.
‘That’s why groceries are so expensive.’
Prof Schmulow explained more market competitors drive competitive rates, meaning Aussies could have more access to affordable groceries if there were reliable alternatives to Coles and Woolworths.
However, the current market has left little room for any new business to move in as there’s already a Coles or Woolworths in most areas.
‘There’s a very, very easy way to fix this – break up Coles and Woolworths. Break up the duopoly,’ Prof Schmulow said.
‘The ACCC has determined they are a duopoly and among the most profitable supermarket chain in the world.
‘My proposal would be to say to Coles and Woolworths, you have six months to sell off a third of your supermarkets to a new company, which is then sold.
‘But they would need to sell a broad range of their stores, not just the least profitable ones.’
However, the lack of options for Aussie consumers doesn’t just impact grocery bills.
Prof Schmulow pointed to Qantas’ dominance over the aviation industry and the control the Big Four banks – Commonwealth Bank, NAB, Westpac and ANZ – hold over the finance sector.
‘Qantas is one of the most profitable legacy airlines in the world and it is so incredibly profitable because it doesn’t have real genuine competition,’ he said.
‘Our Big Four banks are also among the most profitable in the world, with a population of just 26million people.
‘We don’t have a divestiture power and our bank regulator, APRA, prioritises bank stability by having less banks – even though involves providing less competition and less choice to consumers.’
Prof Schmulow claims the government claimed there was one major reason why the government had not introduced a divestiture power.
Several of ‘s biggest corporations, like Woolworths and the Commonwealth Bank, donate thousands of dollars to the Labor Party and Coalition every year.
‘If you don’t get millions of dollars in campaign contributions, you can’t fight an election,’ Prof Schmulow, who previously ran for a NSW senate seat, said.
‘Neither party can turn around and say, “Why don’t we just stop taking donations?” because the other party will still be taking donations and they’ll win.
‘If you want to win, shut your mouth.’
Instead of leaving the decision to accept or reject corporate donations up to individual parties, Prof Schmulow recommended businesses be banned from political donations.
‘Corporations should have nothing to do with what happens in government. Parliament is supposed to be democratically elected representatives of we the people – the Commonwealth Bank and Woolworths aren’t people,’ he said.
‘Our democracy is being sold to corporate donors.’