A Much Deeper Problem Facing Our Economy
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Productivity in Australia has been on a downward trend for decades. The latest moribund GDP figures for this quarter are not anything particularly new. Yes, interest rates are hurting the economy, as they are supposed to be according to monetary policy in the Reserve Bank’s inflation beating crusade. The greater diminishing productivity trend is, however, an indication of a much deeper problem facing our economy. Successive governments have overseen the concentration of ownership in nearly all of our business sectors. Duopolies have replaced any real competition in our markets and this damages productivity. Capitalism works optimally when there is competition between businesses operating within sectors of the market. These corporate giants have circumvented this by gobbling up their competition via take overs and mergers. The ACCC and ASIC have been asleep at the wheel in preventing the overconcentration of corporate power in Australia.
Figure 4 Impact of lower productivity growth on real GDP growth (annual percentage change)
Source: Treasury, (Canberra: Treasury, June 2021), 53. https://www.aph.gov.au/About_Parliament/Parliamentary_departments/Parliamentary_Library/pubs/BriefingBook47p/AustraliasProductivitySlowdown#:~:text=Using%20productivity%20cycles%2C%20Figure%203,through%20to%20the%20early%202000s.
Australia’s Non Competitive Domestic Markets
Australia has become a rentier economy, where these duopolies charge their clients fees, subscriptions, and rents rather than being dependent upon productivity growth for their profits. Consumers and B2B clients are billed ‘user pays’ via charges, leases and fees under this economic model. The absence of any real competition within these sectors means innovation and productivity are not being driven by market forces. Similarly, these big companies control the employment market within their sphere’s of influence because they are the only employer in town. Wage growth has been largely stagnant due to this factor for decades in Australia. Yes, there has been some growth in wages over the last couple of years in response to the hikes in cost of living following high inflation. However, it has not kept pace in this regard and real wages have fallen in terms of their buying power within the economy.
Governments Have Failed Our Economy
Our governments have not tackled the over concentration of corporate power within the economy. The agencies tasked with protecting competition are toothless tigers. Underfunded and staffed by people in thrall to the business world via future job opportunities, they have been ineffective in doing what their agency was set up to do. There seem to be no consequences for these failures and white collar collusion thrives downunder. Whilst our political parties take campaign donations from corporate sources and allow the free movement of civil servants/politicians from the public to the private sector things will not improve in this regard. The disinterest within the Australian community to endemic corruption like this will see it continue to the detriment of the economy and our lives.
The NACC does a better job than the invisible man at keeping a low profile and so far has done bugger all to address long standing scams within our political and governance systems.
Economists and central banks harp on about the importance of productivity to the economy but little has been said or done about the lack of competition within Australia. These folk have been wilfully blind to the effects of this overconcentration of corporate power within our business sectors for too long. Nobody has stood up to the banks and the big end of town during the decades of mergers and acquisitions. Rather, they have been cheerleaders toasting their success and increased size in the corporate quest for ever more market share. The neoliberal dance has been a conga line of CEO and shareholder aggrandisement sashaying its way across our economy. We now live in a world where consumers are struggling in a cost of living crisis, which shows no sign of abating any time soon. Duopolies can price set because there is no real competition for consumers to choose from. Consumers have lost all their market power in the manipulated version of capitalism currently operating in Australia. This is all economics 101 but our timid governments in thrall to zombie neoliberalism show little sign of doing something about it. You can have all the reviews in the world but if you don’t actually do something nothing changes. Unfortunately, our 21C politicians live in a talk fest alternative universe where empty words are their only currency, it seems.
“The ACCC welcomes today’s announcement by the Australian Government that it will direct the ACCC to conduct an inquiry into Australia’s supermarket sector, including the pricing practices of the supermarkets and the relationship between wholesale, including farmgate, and retail prices. The year-long inquiry will also examine competition in the supermarket sector and how it has changed since the ACCC’s last inquiry in 2008.”
- (https://www.accc.gov.au/media-release/accc-to-examine-prices-and-competition-in-supermarket-sector)
We have already had several reviews into the fact that Coles and Woolies control 65% of the market share within the grocery sector. Australian governments love to be seen to be considering doing something without actually doing anything – it happens throughout their remit. Not wanting to offend a vested interest is no way to govern if you are fair dinkum about enacting real change for the better.
Money Laundering Via International Investments In Property
In Australia, we have been waiting for 17 years for the loopholes to be closed to international money launderers in the property market. Despots and organised crime have been investing in Australian property for decades and Aussie middlemen have been growing fat on the fees they charge to facilitate such investments. Real estate agents, accountants and lawyers do not want any tightening up in this regard for obvious reasons. Successive governments have been faffing about in this space and dragging the chain.
White collar collusion is thick on the ground downunder and nobody ever gets busted. This illicit investment pushes up property prices in the capital city markets around the nation.
Poor Productivity A Symptom Of Tainted Markets
We have a much deeper problem facing our economy long term and that is a downward trend in productivity over decades. Businesses have gamed the system and are scamming ordinary Australians. The lack of competition in our markets is hurting productivity and price gouging to the detriment of consumers more generally. Our central bank is too embedded with big business to call this out. Our governments are too afraid of hurting vested interests. Our corporate watchdogs are, in practice, owned and fed by the very corporations they are supposed to be policing. It is a bad puppet show really with the ACCC and ASIC going through the motions like a kabuki performance with no real substance.
It is time for some action on this score but we wont get it until the political party donations and job offering carrots are banned. Corporate power needs to be tackled by a government committed to cleaning up the rigged game.
Robert Sudha Hamilton is the author of America Matters: Pre-apocalyptic Posts & Essays in the Shadow of Trump.
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