A report into soaring grocery prices, rising energy bills and steep airfares will be released on Wednesday amid expectations its findings and recommendations will cause a headache for some of the country's biggest and most powerful companies.
It comes amid a cost of living crisis that has intensified an already-growing distrust of supermarkets, airlines and energy companies.
At the heart of the price gouging inquiry, initiated by the ACTU and led by Allan Fels, is determining in a high inflation environment what's general inflation and what else might be influencing pricing behaviour, the main offending price gouging industries, how they do it and how it impacts everyday Australians.
Part of the problem is Australia is awash with oligopolies, which means there isn't as much price competition as there might otherwise be, which helps explain why real wage growth has been low and why the real prices of so many goods are so high.
There are some other uncomfortable truths facing these industries that will require political will to adopt some of the more uncomfortable recommendations.
The ACTU inquiry has already had an impact, even before its release.
Big business pocketed profits
On January 25, the government asked the ACCC to investigate the supermarket sector. It came a few days after Professor Fels wrote to Treasurer Jim Chalmers saying a key recommendation of his report, to be released on February 7, was there should be a comprehensive ACCC inquiry into competition and prices in the retail food and grocery industry.
"Australia's food and grocery sector is amongst the most concentrated in the world and supermarkets and grocery related submissions led complaints to the inquiry with 325 submissions received raising issues with major retailers. This was more than twice the next largest category of complaints received," he told the treasurer.
He said after the pandemic there had been an increase in profit 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.
The Fels/ACTU price gouging inquiry has put a lot of noses in the business community out of joint, particularly when it called for submissions from everyone affected by price gouging, as well as academics, not-for-profit organisations and think tanks. In other words, business, lobbyists and peak bodies need not apply.
"During a cost-of-living crisis, price-gouging has real victims. Those victims deserve a voice and a policy solution," Professor Fels wrote in an editorial.
For the ACTU it was a no-brainer to hold a price gouging inquiry against a backdrop of a decade of flatlining wage growth, rising inflation and bulging profit margins among some of the country's biggest companies.
And while most of the media attention has been on Coles and Woolworths, the report will include other sectors accused of customer gouging and breaching trust such as energy, airlines and banks.
Electricity prices are part of the problem
Sydney University professor Lynne Chester, from the school of social and political sciences, supplied the inquiry with a detailed submission and powerful testimony into the energy sector, as energy affordability has become a significant public concern following a series of price shocks in 2022 and 2023.
Professor Chester said electricity prices have been escalating since 2005, largely due to increases in the charges paid for the generation of electricity. She said the charge for electricity makes up a significant component of the electricity price paid for by consumers.
And the generation charge is determined by the bidding rules of the National Electricity Market (NEM) which in turn is influenced by the interaction of several regulatory agencies and the participation of generators in the markets for forward financial contracts.
A key issue was that the regulation was designed for a competitive market, assuming competition would deliver lower prices, but the market was never competitive due to the presence of big powerful generator companies that have been merging with retail companies to create giants such as AGL, Origin and Energy Australia.
She said despite the many reports, studies, inquiries and legislative tweaks over the years attempting to make the system work better and fairer, "market power is market power ... and the exercise of market power, over any period, produces outcomes contrary to a competitive market which is supposed to yield the lowest possible prices for consumers".
Put simply, tweaks to the rules and new forms of market performance monitoring have not prevented record increases in wholesale electricity prices over recent years, some skyrocketing to $5000 and sometimes $15,000 a megawatt hour. (The NSW wholesale price during April-June 2023 was $148 per MWh.)
Professor Chester told the ABC she was working on a project that looked at low-income renters and the impact of rising energy bills on their lives. She had conducted a similar project on low-income households a few years earlier but the housing crisis had highlighted the day-to-day cost pressures households are experiencing. She said energy was up there with rent.
She said her research exposed some heartbreaking stories of households cutting expenditure on essentials such as food and health care to pay energy bills.
Examples included parents sacrificing their nutrition or going hungry. Some were reducing GP visits if bulk billing wasn't available or delaying filling their prescriptions. There were some cases where most of their time was spent at home in one room, or if they did go out it was to shopping centres where there was heating or cooling.
"It broke my heart when a pensioner in Adelaide told me he'd been selling his possessions to pay his electricity bills," she said.
And while state and territory governments provided assistance to low-income households to help with energy bills, they were reactive forms of assistance directed at the bill and didn't target the root of the problem.
Professor Chester said what was needed were changes to the economic regulatory regime to reduce the possibility of further significant price increases by generation companies, which she hoped would feature in any policy recommendations.
"I would start with greater transparency about the reasons why generation companies supply capacity at incredibly high prices," she said. "This would require the regulators to be more prescriptive about what is acceptable behaviour, or conscionable conduct, by large generation companies operating in Australia."
She said there needed to be far greater scrutiny of the reasons for the significant price events, which would require giving the regulators more powers, as well as beefed up financial penalties and loss of trading rights imposed by the regulator when the behaviour of generation companies was inconsistent with acceptable practices.
The message is clear: an overhaul of the regulations and beefed up regulatory powers to fix an opaque, complex system that is failing to protect customers from potential price gouging.
LoadingAirline customers also need protection
Another big ticket issue is the price of airline tickets, poor service and a flawed customer advocate, which is funded and run by the airlines.
Fels is expected to look into this as the transport minister Catherine King works on an aviation white paper, which will look at consumer protections including an independent ombudsman or other models seen overseas.
The white paper can't come fast enough. The latest Customer Advocate report reveals a 102 per cent increase in complaints on the previous year, with complaints about COVID-19 impacts, flight delays and cancellations, refund requests and fees and charges the biggest areas of customer dissatisfaction. There was also a significant rise in the average complaint finalisation time frame of 46 days, up from 17 days in 2021. Qantas recorded a 110-day average time frame.
Key areas to look at are the appointment of an independent ombudsman to deal with customer complaints, a compensation scheme for delayed and cancelled flights, clearer rights for refunds and minimum standards for travel credits and customer service.
For instance, in Europe and the UK airline passengers are entitled under legislation to compensation if there is a delay or cancellation of a flight that wasn't caused by an "extraordinary circumstance", such as an extreme weather event, security risk or flight safety issue.
Many of the 750 submissions to the inquiry came from Australians expressing the battles they are enduring as the cost of living crisis bites.
It's a big issue that needs to be dealt with head-on, and that means not just band-aid solutions in our oligopoly-dominated economy, but looking at the ACCC and the powers it is given to ensure effective competition.