Why everything is more expensive in Australia

Have you ever noticed how much we pay for things here in Australia? From electronics to clothes to furniture to food, it seems that Aussies are always being slugged just that little bit extra when compared to overseas prices.

Why is that? Over the years we’ve been given assorted reasons for the price discrepancy, including our geographical isolation from rest of the world, our sparse and spread-out population and even the relatively high minimum wage in Australia.

Rod Sims, chair of the Australian Competition and Consumer Commission (ACCC), says the main reason for Australia’s high prices is our outdated and ineffective merger laws that have allowed a few powerful players to absorb their competitors and effectively set their own prices for goods.

“Effective merger control is essential to ensure markets remain competitive by preventing anti-competitive mergers,” Mr Sims said in a speech to the Law Council of Australia. “Australia’s current merger laws are failing to adequately protect competition, however, and so need to be changed.

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“Many Australians will be surprised to know that Australia does not require companies to obtain ACCC clearance for mergers. Further, contrary to popular myth, the ACCC does not currently ‘approve’ mergers.”

The merger system works like this. If company A and company B wish to merge, there is nothing stopping them from doing so and they are not required to report the merger to any third party beyond the Australian Taxation Office (ATO). If the ACCC believes the merger will reduce competition in a sector, it must make a case to the Federal Court that the merger breaches the Competition and Consumer Act 2010.

The burden of proof is then on the ACCC to prove the merger is anti-competitive after it has already happened, rather than just making sure it isn’t before the acquisition goes ahead.

Mr Sims says this is wildly out of step with most other developed economies where an application to merge must first be lodged with a regulatory body, which has to approve the merger before it can go ahead.

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This has led to a handful of giant companies dominating entire markets – Coles and Woolworths in the supermarket space, Bunnings in hardware and Origin and AGL in energy retailing, just to name a few.

“Many markets are dominated by a small number of providers, including banking, supermarkets, mobile telecommunications, internet service provision, energy retailing, gas supply and transport, insurance, pathology services, domestic air travel, internet search and social networking services,” he says.

The result of all this concentration is higher prices and poorer services for you. If there’s no pressure from the competition to keep prices down and service levels up, then why would they bother?

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The ACCC wants to overhaul Australia’s merger laws to bring them in line with those in the US, UK, EU and Canada where companies must get regulatory approval before pushing ahead with any merger.

“I want [Australia] to catch up with the rest of the world,” Mr Sims told TND.

“Have a proper merger approval process where we make the decision, and if you [a company] don’t like it, you go to court.”

The needs of companies are being prioritised over the interests of consumers and the wider Australian economy. Reform is needed if we’re ever going to address the high prices we can sometimes pay in Australia.

Did you know that Australian companies don’t need approval before mergers? Do you think they should or do you think it’s better that businesses have fewer restrictions? Let us know in the comments section below.

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Written by Brad Lockyer