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On the cost-of-living crisis

12 February, 2024

There's no doubt that cost-of-living pressures are a critical issue for Australians across the country right now. The high inflation rate has triggered 13 interest rate rises and increases in energy, petrol and grocery prices. On top of that, the housing shortage crisis has seen rents soar. Australians are doing it tough.

Although I acknowledge these inflationary pressures are largely the result of global events out of the government's control, there is still much the government can do. As recently as last week, an inquiry commissioned by the ACTU and conducted by Professor Allan Fels found that some of the highest price increases have occurred in sectors where a few players have disproportionate market power over consumers, supply chains and their workforce. The inquiry also found that the surge in corporate profits after the initial stage of the pandemic could not be explained by increasing sales or output. The supermarket sector, where there is an effective duopoly of market share, is one such example, so I very much welcomed the government's January announcement of the ACCC investigation into pricing practices of supermarkets and the relationship between wholesale, farm gate and retail prices. In other words, are the big supermarkets engaging in anticompetitive behaviour and price gouging? This is a start.

But, critically, Professor Fels found that it was not just in the supermarkets where these price increases have been the sharpest. Other sectors where just a few players enjoy a large share of the market, including banks, airlines and electricity providers, were also named as having potential for anticompetitive behaviour. Supermarkets are, indeed, an important place to start, because grocery prices affect us all, but every Australian also needs banks and electricity, so these, too, must become the focus of the government's attention.

I'd like to talk specifically about the electricity providers and energy prices today, because last month we learned that, due to the growing proportion of renewable energy supplying the sector, wholesale energy prices across Australia's main electricity market had almost halved in 2023 when compared to the previous year. This resulted in a drop of 24 per cent in the prices paid by retail customers. This is, indeed, wonderful news. But, unfortunately, these lower wholesale prices have yet to be translated into lower household energy bills.

We know that renewable energy is the cheapest form of energy and that transforming Australia into a renewable energy superpower will be an enormous win for consumers, as cheaper energy means that cheaper prices will flow through not only to electricity bills but also to every sector of our society as it becomes cheaper to run businesses and to transport goods. The use of electric vehicles powered by renewable energy will eventually eradicate petrol bills. It is critical, however, that we ensure these lower wholesale energy prices are not gobbled up as profits by energy provider companies but, instead, flow through as savings to households and businesses so we can see lower prices on our power bills. The government must also pay close attention to this space.

On 1 July the Default Market Offer will set the annual price cap. This is the default safety net price for consumers. It is a price cap on how much energy retailers can charge electricity consumers on default plans. This is when we will see whether the lower wholesale energy prices are being passed on to Australian businesses and households.

While I very much welcome the government's announcement of the ACCC inquiry into supermarket competition and prices, more needs to be done in other critical sectors as well, to identify and stamp out the potential for anticompetitive behaviour by energy providers, airlines and banks. Most pressing, I believe, is ensuring the reduction in wholesale electricity prices is passed on to our households and our businesses. This must be a priority for government.