Grocery Pricing

Adjourned debate on motion of Hon. R.A. Simms:

1. That a select committee be established to inquire and report on grocery pricing in South Australia with particular reference to:

(a) the trends in grocery pricing in South Australia, compared to other states in Australia and internationally;

(b) the disparities in grocery pricing between metropolitan and regional areas;

(c) the impact of high grocery prices on consumers, particularly for those on low incomes;

(d) the relationship between wholesale prices paid to farmers and the retail price paid by consumers;

(e) the prevalence of food insecurity in South Australia;

(f) the prevalence of price gouging practices and anti-competitive behaviour among grocery retailers and the impact on consumers;

(g) factors contributing to high grocery prices;

(h) potential opportunities for further regulation of grocery retailers and opportunities for state government intervention; and

(i) any other related matters.

2. That this council permits the select committee to authorise the disclosure or publication, as it sees fit, of any evidence or documents presented to the committee prior to such evidence being presented to the council.

(Continued from 30 November 2023.)

The Hon. C. BONAROS (17:47): I rise to indicate my support for the motion moved by the Hon. Rob Simms. If you think there are not concerned people out there keeping a close eye on what we discuss in this place, then think again. I certainly thank those interested people who keep a keen and watchful eye over the issues that we are debating in here, including very recent developments.

As luck, or indeed good timing, would have it, the ABC, just in the last hour or so, has reported on a report by the former chair of the ACCC, Allan Fels. The report, commissioned or initiated by the Australian Council of Trade Unions, an investigation undertaken by Mr Fels, has today been handed to Ms McManus and will, according to the ABC, soon be handed to the federal government.

Mr Fels makes some 35 recommendations in that report handed down today. Those findings, in what has been dubbed a blistering report, focus on banks, supermarkets, aviation and energy companies, which he says, according to his findings, are exploiting their market power in ways that drive up inflation and hurt Australian households.

He confirms what many fear, namely that rising prices are caused by not just true inflation but often greed, corporate gouging and profit. Again, the blistering report that has been done—I have not read the report, but I have seen the article and extracts from it—states that big business is exploiting its market shares in ways that have driven up inflation and hurt Australian households. It is an 80-page report. Professor Fels says:

The power of corporations to unduly lift prices had been a central factor in the recent cost-of-living crisis affecting so many Australian households…

Companies have been able to leverage the disruptions and uncertainty that followed the COVID pandemic into unprecedented profitability.

The ability of companies to charge unfair prices, amidst the unprecedented economic and social dislocation ensuing from the COVID pandemic, has significantly undermined the well-being of the Australians we heard from.

Professor Fels also stated in his report:

Adding insult to injury, numerous of the individual allegations of price-gouging received by our inquiry dealt with unfair behaviour—

not just by the supermarkets—

by…commercial banks, which have used their market dominance to extract even more profit from customers through higher interest costs and other charges.

Consumers have been hit twice by the misuse of corporate power. First, they experienced general inflation largely caused by profit-seeking after the pandemic, then were gouged again by financial companies leveraging their market dominance to make extra profits even under higher interest rates.

Professor Fels goes on to say that these are his views. After years and years of experience with the ACCC, he has formed these opinions and intends to pass on the recommendations that he makes to the federal government for consideration. When it comes to the food and grocery sector, and in particular the duopoly between Coles and Woolworths, according to the article almost half of the public submissions to the inquiry related just to supermarket prices and practices. Professor Fels says:

Neither Coles nor Woolworths experienced declines in profit nor revenue over the pandemic as their main businesses were, rightfully, deemed essential services…

This position allowed business continuity and retained their position in the market.

What has occurred since the pandemic…is an increase in margins in both Coles and Woolworths food and grocery segments driven by low competitive forces and an ability to not pass on immediate cost reductions.

Professor Fels discussed the use of 'special' tags being used on normal grocery prices:

Misleading price displays are illegal but despite this, there is no prescribed minimum period where a business must advertise…

The extent of the obligation is that the item and a reasonable proportion of the items must have been sold at that price before businesses are able to claim it is a discount.

I did not even know that was a thing, but apparently it is, and it is in this report. Professor Fels says:

In a period of rapid price increases, it is many consumers' evidence that businesses have not been fairly claiming to be discounting.

Professor Fels welcomed the steps the government had taken, which included a review of the food and grocery code and direction to the ACCC to investigate prices. As you would expect, the duopoly of which he speaks have repudiated price gouging allegations in recent weeks and I am sure will continue to do so after the outcome of this report, but if you were to ask any average person on the street who has walked into a supermarket recently and seen the sorts of prices on shelves, I do not think they would disagree with any of the assessments that we have just heard.

There is absolutely no question that we have all seen and felt, and I think every household has felt, the impacts of supermarket prices, and if we are feeling it, then I do not know how a low-income family is actually managing to cope. I walked into the supermarket last week, and I have been watching my supermarket basket, and I spent $180. There was no fresh fruit and vegetable in the trolley, there was no meat in the trolley, there were just staples. I knew that I would have to then go into the fruit and veg store next door and I knew then that I would have to go and buy other produce that we needed at home. By the time I got home, I had spent in excess of $300.

I know that I am very fortunate to have $300 to spend on those groceries, but it left me speechless because I got home and I could not see what I had. I just could not see what that $300 had bought me. Again, I appreciate and acknowledge how fortunate I and others in this place are to be able to go into the supermarket and do that. I appreciate that, for many families, items that were once commonplace in the supermarket trolley are now completely out of reach.

I did read with interest when the Hon. Robert Simms first initiated this inquiry that Foodbank has reported that over 50 per cent of the people who visit Foodbank are actually people in paid employment, people who are working every day but simply cannot afford the prices that are being charged in supermarkets.

I suppose price gouging became really interesting as a result of COVID and things like potato shortages. I do not know who likes potato crisps in here but I know that the average packet of crisps in the supermarket now costs well in excess of $5; some of them cost $7.50. If you like Red Rock, the Hon. Ian Hunter, then you better be prepared to pay $8.50 a packet—$8.50 a packet. We laugh, but it is extraordinary that you need close to $10 to buy a packet of chips in the supermarket. That is the point I am making.

I use the chips as an example because my son loves potato chips, and I have noticed the price of his favourite brand more than anyone else. But there was a potato shortage. There was COVID. Miraculously, at the same time, the packet of chips shrunk. The price did not shrink, but the packet of chips shrunk. The price continued to go up.

As far as I know, the potato shortage, which saw pretty much every fish and chip across South Australia run out of fresh potatoes and saw us bringing in potatoes from other states, has worked itself out, but the price of chips in the supermarket, I tell you, has not worked itself out one iota. They are expensive and that is a luxury item that we are talking about.

There is absolutely no question that families are struggling. We all know that. We know how hard families are doing it. Reports like this that lean to recommendations and findings of price gouging should be concerning to all of us. There are lots of considerations in this. When you talk to producers of products as well, they say, 'We are wearing extra costs as well, so we have to pass those on.' But there are, of course, complaints being made, very valid complaints that we need to be taking into account, by producers of those items that we enjoy at our supermarkets because they certainly do not feel like they are getting their fair share when it comes to their profit margins that are being made.

We are very blessed to live in a state which is blessed with soils and water to produce some of the best products on supermarket shelves across the nation. We are extraordinarily lucky to live in this state. The idea that not only is that produce out of reach for us as shoppers, particularly for those families who are really struggling to make ends meet in this cost-of-living crisis, but that those farmgate prices are as low as they are, impacting producers as well, is unacceptable and ought to be the subject of serious consideration.

I know these are debates that we have had over the course of history many times, but I think it is very good timing on the part of the Hon. Robert Simms to bring this motion to this place. Of course, that is not even touching on the impacts on our regions. When you look at the prices in our regions, the mind actually boggles as to how people are affording to feed themselves, because we know what sorts of prices are being paid in metropolitan Adelaide compared with our regional towns. We know that some of those items are simply unaffordable.

I think it also raises questions—and I am hoping that this is something that the Hon. Robert Simms will look at—about the practices of some of those corporate companies when it comes to greed. I am pretty sure that it costs the same amount of money to deliver Coke as it does to deliver bottled water to a rural or remote town, and yet I am pretty sure that I would be able to buy that bottle of Coke for a lot less, a fraction of the price of fresh, clean bottled water. That also brings into question some of the practices of the companies that are also being criticised for gouging off the back of these communities.

There is obviously a lot of work to be done in this space. I have only scratched the surface in terms of what Professor Fels has said today and have not delved into the issue of dairies, breads, cereals, fresh fruit and produce and so forth, but I am sure others will do that, and I will leave that to them.

I do indicate my wholehearted support for this. Not only that, I genuinely hope that there will be some learnings and recommendations that this government will take on board in terms of what we can do to ensure that households are not going without, because we know that today there are people who are making really difficult choices. I joke about being able to buy a packet of chips, but I know that is something that is a really difficult choice for some families who cannot afford to put bread on the table, let alone a packet of chips, and who cannot afford to give their kids milk, let alone spend $8.50 on a packet of chips. They are the people who are hurting the most out of this, and I hope that will be the focus of this inquiry.

The Hon. T.A. FRANKS (18:03): I move to amend the motion as follows:

After paragraph 1, insert new paragraph 1A as follows:

1A. That the committee consist of six members and that the quorum of members necessary to be present at all meetings of the committee be fixed at four members.

The Hon. N.J. CENTOFANTI (Leader of the Opposition) (18:04): I rise on behalf of the opposition to indicate our support of the motion put forward by the Hon. Robert Simms. I note that this call for a select committee inquiring into a range of aspects affecting grocery pricing does not come as a lone voice. I acknowledge the work taking place federally with the ACCC investigation and the Senate inquiry into the same issue, as well as state-based inquiries in both New South Wales and Queensland.

Consumers around the country are hurting and our farmers are hurting. It is proper and diligent that we have a deeper look into this issue and its impact on South Australia more broadly. Your average Australian knows all too well that we are in the midst of a cost-of-living crisis. It is not just our energy bills which are increasing because this negligent government are obsessed with expensive, inefficient renewables, but, sadly, it is the cost of putting food on the table and it is the cost of packing food for children's lunchboxes. It should be the right of every South Australian schoolchild not to go to school hungry, yet, sadly, this is not the reality for a growing number of South Australian households.

We support this motion not only because we are in a cost-of-living crisis but we are also in a cost-of-doing-business crisis. Many producers of our food and fibre are telling me that they feel like they are drowning. As the cost of business consumables increase, the price paid for produce at the farm gate is simply not covering these costs. Growing food in Australia is becoming more and more unsustainable.

AUSVEG industry figures show that the average cost across their produce lines note a 30 per cent mark-up in the price of food from the farm gate to the retail shelf. This is the average. Shockingly, potatoes can sit on anywhere between a 400 and 800 per cent mark-up. All the while, growers are reporting margins—that is, net profit —of 1 to 5 per cent if they are making money at all.

Helping the farmers who feed us is as important as helping consumers who put food on their tables, but what we have is an uneven playing field. Farmers are not winning; consumers are not winning. There are two big brands who, likely, are doing quite well out of this situation.

I stress that this committee has an equally important role in highlighting and acknowledging what is working well. Our state's independent supermarkets have a transparent and mutually beneficial relationship with their growers and the produce markets and co-ops that supply them. This shows that there is another path forward which can and should be investigated. This is what this committee will hopefully get to the bottom of.

As it is, we cannot continue to erode our farming base. We must ensure the market is resilient, and we must ensure a fair price is paid at the farm gate. We must nurture an economy of resilience and investment. Our growers cannot build for the future when they are forced to operate on such exceptionally slim margins.

If a continued duopoly and complicated state and federal regulations continue to drive Australian growers to the wall, we risk shooting ourselves in the stomach. Industry body AUSVEG conducted a sentiment survey that revealed 30 to 35 per cent of growers in the industry want to get out. I do not have the exact figures at hand from the National Farmers' Federation, but I imagine the livestock industry would be similar. It shows how tough it is for our farmers here in Australia and, indeed, in South Australia. They would make more money by simply leaving their money in the bank and not growing our food. This is no way to do business, but our farmers soldier on under these conditions, because it is not just their life; it is often their love.

Paragraph (b) of the terms of reference speaks to the very real challenge of grocery price disparity between metropolitan Adelaide and regional South Australia. Regional areas face higher distribution costs, even further limited competition and logistical challenges, all leading to elevated grocery prices. It does not help that, as well as the non-existent competition, our regions have been slugged with the new heavy vehicle levy introduced by the federal Albanese Labor government. The extra 6 per cent levy to heavy road users—that is, trucks which move our food and fibre around—further add to the cost of freight from farm gate to market to distribution centre to store.

It is costs on top of costs for our regions, and it is not fair. The financial burden lugged on residents in rural and remote locations exacerbates economic inequality. Moreover, that discrepancy can and does hinder local economic development. You can rest assured that we will be investigating regulations and policies to ensure that there are no ridiculous and unnecessary burdens on regional communities to access the same food that these regions produce.

A good government should take measures to ensure equitable access to affordable food. They should want to foster balanced economic growth across the whole state, and they should want to improve the overall wellbeing of communities in both metropolitan and regional settings. I have an amendment to this motion. I move to amend paragraph 1(h) as follows:

Leave out 'regulation' and insert 'scrutiny' and leave out 'opportunities for' and insert ', including'.

There is a common misconception that more regulation is required to fix problems that are initially created through or by regulation. As Liberals, we believe in government that nurtures and encourages its citizens through incentives. We believe in transparency and scrutiny, and we believe in less regulation and less red tape, so we have moved the amendment to that effect.

It is my understanding that the Hon. Frank Pangallo is no longer moving his amendment, and I note the government also have a very last-minute amendment which has only just been put on our desks fairly recently. I would just like to make the point to the Government Whip, the Hon. Ian Hunter, and his Labor colleagues that perhaps he should take his own advice when it comes to giving other members of this chamber adequate time to consider amendments.

I look forward to this select committee being established. I look forward to highlighting the incredible work of our produce markets, producers and independent retailers, who face an ongoing battle of David versus Goliath. I thank the honourable member for bringing this committee forward, and I hope it contributes important information and recommendations to both state and federal conversations.

The Hon. S.L. GAME (18:11): I rise briefly to support the motion to establish a select committee to inquire into and report on grocery pricing in South Australia at a time when the cost-of-living pressure on families is at breaking point. Representing more than three and a half thousand businesses, Horticulture Coalition of SA has reported that growers in South Australia are being paid just 98¢ per kilo on average for produce, down from $1.25 per kilo in the previous year. This goes some way to explaining the super profits posted by the major supermarkets, with Coles raking in $1.1 billion and Woolworths an eye-watering $1.6 billion in profits last year alone.

Amid a cost-of-living crisis, if supermarkets continue to deny growers a fair cut from profit margins, coupled with escalating costs due to inflation, consumers will be further impacted as growers struggle to provide more for less. There is now a major disparity between the prices farmers are getting and what consumers are paying. If farmers are forced to exit the industry because they just cannot afford ongoing increases in wages and costs of electricity, fertiliser, machinery and so on, we will be forced to buy imported frozen produce, often inferior and grown without the standards in place for our local industry.

If we want to continue to enjoy local products, we need to support growers and discourage the major supermarkets from any temptation to price gouge, which hurts consumers. It is alarming to hear stories of families cutting back on necessities such as fruit and vegetables because they can no longer afford to buy these food staples. We all know the consequences of a lack of a balanced diet. Supermarkets do not have the right to make people unwell just so they can line the pockets of shareholders. I support the motion.

The Hon. B.R. HOOD (18:13): I also rise to support the motion and wish to focus on what I would consider to be the more significant aspects of this proposed inquiry. It certainly would not surprise my colleagues in this place that subparagraphs (b) and (d), which directly affect farmers in regional South Australia, are something that I am very interested in. Subparagraph (b) of the motion, depending on the amendments from the government, references disparities in grocery pricing between metropolitan and regional areas. Subparagraph (d) looks at the relationship between wholesale prices paid to farmers and the retail price paid by customers.

Subparagraph (d) must be a paramount concern because, without our hardworking farmers, we have no food and we have no fibre. In fact, I have probably said it not as eloquently as that in the past. Without farmers, we have no food. Without food, we are stuffed. I am pleased that this issue is not only being looked at at a state level but also now at a national level, as the Hon. Nicola Centofanti has ventilated. I can go on because, as a politician, we all like to hear our own voices, but everyone has spoken at length about this.

At the end of the day, if no action is taken a systemic issue resulting in wideranging adverse effects will develop. It will impact employment and it will impact health, in particular. Generations-long farmers will look to sell the family farm. Imports of fresh produce and meat will grow, and low income consumers who are unable to afford fresh produce will have to rely on prepackaged and processed food. Fresh local protein sources will become out of reach for many, if they have not already.

I am pleased to support this motion. I thank the honourable member for bringing it to us. It is timely and it is significant. Cost-of-living pressures impact us all but especially so in the regions and especially so for our farmers. Opaque pricing mechanisms and the power imbalances between farmers and the supermarket giants necessitate investigation. I hope the select committee motion garners support for that to occur, and I commend it to the chamber.

The Hon. T.T. NGO (18:15): I rise to speak on behalf of the government in support of this motion, with some amendments. I move:

Paragraph 1—leave out subparagraph (a) and insert new subparagraph as follows:

(a) The prices for groceries and staple goods and products at South Australian supermarkets and grocery stores, compared to other states in Australia;

After subparagraph (b) insert new subparagraph as follows:

(ba) The prices paid to local growers, producers and suppliers for goods and services compared to prices charged to consumers in South Australian supermarkets and grocery stores, and the reasons for these disparities;

In subparagraph (c) leave out 'The impact of high grocery prices on consumers' and insert:

'The impact of retail consumer pricing on consumers'.

Leave out subparagraph (d).

Leave out subparagraph (g).

Leave out subparagraph (h) and insert new subparagraph as follows:

(h) Potential opportunities for price monitoring, transparency in retail pricing and further regulation of pricing and;

We understand the Hon. Robert Simms has brought on this motion for the establishment of a select committee in response to the impact that the rising cost of essential groceries is having on South Australians, especially on vulnerable individuals and families in our community. On 25 January 2024, Prime Minister Albanese announced that the federal government will direct the Australian Competition and Consumer Commission (ACCC) to conduct a 12-month price inquiry into supermarkets.

The ACCC's inquiry will consider the impacts of online shopping, loyalty programs and changes in technology on competition. It will also examine the difference between farmgate prices and checkout prices. The consumer group Choice will also receive funding to provide shoppers with a clear understanding of how supermarkets are performing in monitoring prices.

The Labor Albanese government has also announced a review of the Food and Grocery Code of Conduct to ensure that the supermarket sector is working as it should, and has appointed Dr Craig Emerson to lead the review. We are sure these federal initiatives will support the intended work of this select committee.

As the Hon. Robert Simms referred to, the ABS data tells us that people are changing spending patterns and cutting back on items that are lower priorities than groceries, such as furniture, clothes, shoes and other household items. I think we can all agree with the unfairness of the reality that, while Coles and Woolies make huge profits, we have many South Australians struggling to put food on the table.

Seasonality of produce, transportation costs, competition and labour costs are all factors that will have varying degrees of impact depending on location as well as other external factors. There are steps that we can take and work together as a community to mitigate the impact of rising grocery prices and promote food security without diminishing the urgent need for more affordable groceries. We can also look at ways that families can reduce food waste and shop smart by looking for sales and reduce reliance on processed or convenience foods.

The fact is that the prevalence of food insecurity is a real concern and this Labor Malinauskas government wants all Australians to have reliable access to nutritious and culturally appropriate food at all times. This government hopes that this select committee will help South Australia achieve better food security as we look at ways to improve access to affordable, nutritious food. We look forward to supporting this motion, with amendments.

The Hon. R.A. SIMMS (18:19): I want to thank all members who have participated in this debate: the Hon. Connie Bonaros, the Hon. Nicola Centofanti, the Hon. Ms Game, the Hon. Frank Pangallo, the Hon. Ben Hood and the Hon. Mr Ngo. I think it is really welcome to see that this chamber is taking this issue seriously and there seems to be a consensus across this chamber of parliament that this is an important issue for us to deal with. We certainly welcome that in the Greens.

It is, as has been observed by other speakers, a really important and timely issue for the parliament to deal with. Indeed, just this week new data has come out from the Australian Bureau of Statistics that actually demonstrates that Adelaide not only leads the nation when it comes to inflation but also leads the nation when it comes to the prices of food and non-alcoholic beverages. We have seen in Adelaide a 16 per cent increase in the cost of food and non-alcoholic beverages over the last three years—that is ahead of every other capital city in the country. I think it is important for the South Australian parliament to look into this matter.

As has been observed, there is a real issue also with respect to the prices being paid to farmers and local producers for their goods. They are being dudded, and that is happening at a time when you have big corporations like Coles and Woolies making record profits, ripping off consumers in the middle of a cost-of-living crisis. I really hope that this inquiry can hold those big corporations to account, hold their feet to the fire and really expose some of the price gouging practices.

I might just briefly indicate the Greens' position on the amendments. The government has reached out to me regarding their amendments. We are happy to accommodate those in order to get this committee over the line. I am aware of the amendments that the Liberal Party have put forward. I guess of concern to me is the fact that the Liberal amendment seeks to remove the potential for the committee to consider options for regulation, and I see that as being a key action point for the committee. It is important to shine a light on what is going on, but we need to insert some verbs in there as well and actually look at what we can do. The potential for regulation, I think, is important, so for that reason we will not be supporting the Liberal Party amendment. As I indicate, we will support the government's amendments.

The PRESIDENT: I am going to work my way through the amendments. The props are out of order but this is what we are working with, so I seek your patience and indulgence as we try to work through this. The first question I am going to put is that subparagraph (a) as proposed to be struck out by the Hon. T.T. Ngo stand as part of the motion. If you are voting for the pure Simms motion you will vote aye; if you are prepared to support the Hon. Mr Ngo's amendment you will vote no.

Question resolved in the negative.

The PRESIDENT: The question is that new subparagraph (a) as proposed to be inserted by the Hon. T.T. Ngo be so inserted. If you are supporting the Hon. Mr Ngo you will vote aye.

Question agreed to.

The PRESIDENT: The next question is that new subparagraph (ba) as proposed to be inserted by the Hon. T.T. Ngo be so inserted. If you are supporting the Hon. Mr Ngo you will vote aye.

Question agreed to.

The PRESIDENT: The next question is that the amendment moved by the Hon. T.T. Ngo to subparagraph (c) be agreed to. Again, if you are supporting the Hon. Mr Ngo you will vote aye.

Question agreed to.

The PRESIDENT: The next question is that subparagraph (d) as proposed to be struck out by the Hon. T.T. Ngo stand as part of the motion. If you are supporting the Hon. Mr Ngo, you will vote no.

Question resolved in the negative.

The PRESIDENT: The next question is that subparagraph (g) as proposed to be struck out by the Hon. T.T. Ngo stand as part of the motion. Again, if you are voting with the Hon. Mr Ngo you will vote no.

Question resolved in the negative.

The PRESIDENT: The next question is that the word 'further' in subparagraph (h) stand as part of the motion. If you are supporting the Hon. N.J. Centofanti, you will vote aye and if you are supporting the Hon. T.T. Ngo, you will vote no.

The council divided on the question:

Ayes 8

Noes 11

Majority 3

AYES

NOES

PAIRS

Question thus resolved in the negative.

Sitting extended beyond 18:30 on motion of Hon. K.J. Maher.

The PRESIDENT: The next question I am going to put is that the amendment moved by the Hon. T.T. Ngo to subparagraph (h) be agreed to. If you are supporting the Hon. Mr Ngo, you will vote aye.

Question agreed to.

The PRESIDENT: The next question is that new paragraph 1A as proposed to be inserted by the Hon. T.A. Franks be so inserted. If you are supporting the Hon. Ms Franks' amendment, you will vote aye.

Question agreed to; motion as amended carried.

The Hon. R.A. SIMMS (18:31): I move:

That the select committee consist of the Hon. F. Pangallo, the Hon. J.S. Lee, the Hon. B.R. Hood, the Hon. R.B. Martin, the Hon. M. El Dannawi and the mover.

Motion carried.

The Hon. R.A. SIMMS: I move:

That the select committee have power to send for persons, papers and records, to adjourn from place to place and to report on 1 May 2024.

Motion carried.