Kevin Rudd’s rhetorical swipe at Coles and Woolworths has caused quite a stir and should give great pause to Wesfarmers as it contemplates going over the top to buy into the world’s most concentrated grocery market.
Whilst the big two are actively in denial, the bald facts of the matter are that they are both still generating super returns because of the unprecedented market power they command.
One of the worst legacies of the Howard years will be the tragic duopolisation of Australian industry. Consumers have been ignored for the past 11 years and our industries have become more concentrated than ever before.
Peter Costello was on a hiding to nothing on last night’s 7.30 Report as he attempted to belittle the Rudd plan to sick the ACCC onto Coles and Woolies. The whole point of the exercise is to put pressure on the duopoly to do the right thing. They’ve never suffered the same political scrutiny as the past two days, all because of Rudd’s pronouncements.
Given that Rudd has gone hard on big oil and now the grocery duopoly, it must surely only be a matter of time before he waves a big stick at the banking cartel, particularly over penalty fees.
The evidence of gouging is there for all the world to see. In 1996, Woolworths made a net profit of $234 million on sales of $14 billion. After this week’s profit upgrade, Woolies is headed for net profit of $1.25 billion in 2006-07 on sales of $42.7 billion.
Similarly, the Commonwealth Bank was trading at about $10 back in 1996 when the Howard government offloaded its remaining 50% stake based on annual net profits at the time of $1.12 billion.
Today, CBA shares are at $55.30 and if Rudd has any sense, he’ll follow his Woolies strategy and announce a banking customer charter the day after CBA reports an estimated $4.3 billion net profit for 2006-07 next month.
Peter Costello will ridicule this at his peril because the punters are sick and tired of being ripped off by big banks, big oil and the supermarket duopoly.
And let’s hope the Rudd family have the good sense to offload their $300,000-plus investment in the Big Four banks before unveiling a pro-consumer crack down.
Finally, has anyone else noticed that it was the ABC that went hardest on the grocery crackdown. The commercial media is potentially compromised by the huge supermarket advertising budgets and Fairfax even boasts former Woolworths CEO Roger Corbett as a director.