By MILLIE MUROI, Economics Writer
They’re the villains that return in every episode of the cost-of-living fight. And despite the competition watchdog swallowing any mention of “price gouging” in its recent inquiry, supermarkets are still copping heat.
They’re an easy target because there’s little competition for places where people have been noticing price spikes more than in the aisles – and checkouts – of their local Coles or Woolworths.
We also know consumers tend to overestimate price pressures. Why? Because eye-popping price rises are more memorable than the deals and discounts we land. Humans are programmed that way because it’s more important for our survival to spot bad things – like a tiger in the trees – than good things, like a warm patch of sunshine.
But eagle-eyed customers were a key reason supermarkets got bitten by the watchdog for their illusory discounts last year, and both Labor and the Coalition know that cost of living is the single biggest issue they have to win voters over on for a chance to form government.
That’s why Opposition Leader Peter Dutton has pushed for powers that would give him the ability to break up the major supermarkets, and Labor has been cracking down with a mandatory food and grocery code and a promise to outlaw price gouging.
But there’s been a key bullet point missing on the shopping list: a clear idea of what “excessive prices” actually mean. One shopper’s idea of price gouging could be vastly different to that of their neighbour – and almost certainly different to that of the bosses of Coles and Woolworths.
Now, the competition watchdog this year released a damning report revealing Australian supermarkets nudged up their profit margins during the cost-of-living crunch and are among the most profitable supermarkets in the world.
But they stopped short of calling Coles and Woolworths out for “price gouging”: a subjective and pejorative term for when businesses increase their prices much more than is considered “reasonable” and “fair” – which are also subjective.
And in their list of 20 recommendations, not once did the Australian Competition and Consumer Commission mention the need to ban the practice.
So, if the ACCC didn’t suggest it, where did the idea come from? And why is a ban on excessive mark-ups on the cards?
Well, it’s another case of Labor proposing a small but worthwhile reform. These ideas have to be ticked off by big-wigs, but the heavy lifting is done behind the scenes.
Pull back the curtains of government, and you’ll find a section of Treasury beavering away under the leadership of assistant minister and former economics professor Dr Andrew Leigh.
The Competition Taskforce, established by the government in 2023, is a response to the increasing concentration of the Australian economy over the past 20 years. It’s made up of a couple of dozen people and Leigh says it’s not just a handful of men with grey beards tapping out once-off reports, which has traditionally been the way economic reform has been put on the table.
Instead, he labels it a “crack team” of about a dozen people, churning out policy advice on an ongoing basis and tick-tacking with stakeholders – in a way that experts tasked to do a single report may not.
While the ACCC has taken the reins on scrutinising supermarkets recently, most memorably through its scathing report, Leigh says the government’s policies have been informed by the taskforce’s previous work in the space, such as the mandatory food and grocery code – aimed at protecting suppliers and farmers – which came into play at the beginning of this month.
And while the ACCC might have shied away from slapping the “price gouger” label on the supermarkets, Leigh says the weight of the evidence suggests there’s a clear problem.
“We’ve seen their margins increase over COVID,” he says. “We’ve got them in court with the ACCC. The supermarkets have not exactly covered themselves in glory over the last couple of years.”
And compared with the last time the competition watchdog probed the supermarket sector in 2008, Leigh says the 2025 inquiry is awash in data. “[The ACCC] has analysed more than a billion prices so they’ve got data on more than a million prices from the two supermarkets, every week, over a five-year period,” he says: something that was unheard of two decades ago.
The availability of information and the ability to crunch and analyse huge amounts of data has given the government confidence to make the call – or at least to take action on an issue they know voters are still eyeing very closely and passionately.
It’s far from an immediate fix. The government’s promise to ban price gouging by supermarkets will first require them to form a new taskforce to give advice on what “excessive pricing” might actually look like.
And chasing the two giants around with a stick doesn’t necessarily remove some of the key barriers to stronger competition in the supermarket sector, such as inconsistent zoning laws which lock out competitors in many areas around the country. While the government has, in principle, agreed with all the recommendations from the ACCC, we’re yet to see follow-through on most of them.
That doesn’t mean that setting out to define “excessive pricing” is a bad thing. It’s one of those concepts that seems obvious but which people still disagree over. And without a yardstick, the supermarket giants – and every other business – know there’s a grey area they can play in and take advantage of.
The government’s latest action on supermarkets is good because it puts Coles and Woolworths on notice. If they are misbehaving or pushing their luck with questionable pricing, the bosses should be gathering at their drawing boards, rethinking their approach and preaching some caution.
If they’re not doing anything wrong, they have nothing to worry about.
Either way, it also puts every other sector on notice – especially given the taskforce’s current work on identifying concentration hotspots: areas of the economy where big firms dominate and competition is especially weak.
And by clearly setting out what “excessive pricing” means, we can more easily deter firms from crossing the line, identify when and where it’s happening and crack down on the practice – and ultimately the prices we pay.
