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Thursday, 15 May 2014
Page: 3985


Mr CRAIG KELLY (Hughes) (10:47): I associate myself with the words of the member for Gellibrand and congratulate him on his speech and on his initiative. Today, I would like to provide the House an update I have on the Coca-Cola index. The Coca-Cola index gives an international comparison of the everyday low supermarket price of a two-litre bottle of Coca-Cola in supermarkets around the world. Given that Coca-Cola is a global commodity—it is sold in 200 countries throughout the world and is made through a highly automated process from the same standard recipe—it is a very good proxy as a test for competition in each international market.

The sad thing about the Coca-Cola index is that, compared with almost every country I have looked at, whether it has been New Zealand, South Africa, Canada, the UK, Singapore, Taiwan or even Germany, Australia has the highest supermarket prices for Coca-Cola by a long way—not just 10 or 20 per cent but 40, 50, 60 or even 100 per cent more. So I was very excited recently, when I was able to go on a delegation to Israel, to think that I could perhaps find a country that actually has a higher supermarket price for Coca-Cola than Australia.

I will give you some background on Israel. The Israeli parliament recently held an inquiry into higher supermarket prices in that country, because it was concerned that there was a lack of competition in the marketplace, given that in Israel the two major supermarket chains control 60 per cent of that market. God knows what it would think of a market where the major two control 80 per cent. What that inquiry found was that Israel had on average 20 per cent higher prices than all other OECD countries. In comparing Israel to Europe it found that its supermarket prices were actually 25 per cent higher. So I was confident that I could finally find a country where the price of Coke was higher than in the supermarkets in Australia.

But, even though Israel has a GST of 16 per cent and all those other factors, I was sadly disappointed. I visited a small supermarket in downtown Tel Aviv, and I found a 1.5-litre bottle of Coke on the shelf there. Their everyday low price was 6.9 shekels. Even forgetting the higher taxes, that is the equivalent of the Australian price of $2.86 for a two-litre bottle, making the conversion and the comparison. In Menai in my electorate that same two-litre bottle of Coke is now $3.99. So there I was in a country that has the highest supermarket prices in the world, and yet the price that my constituents are paying in my electorate is actually 40 per cent higher than that.

This is just another example of the lack of competition and the artificially high prices that Australian consumers are paying at the supermarket checkout today. I could give other examples. There is the example of Vegemite. Bizarrely, a jar of Vegemite made here in Australia is cheaper to buy in a UK supermarket or a supermarket in New Zealand than it is to buy here in Australia.

We have seen the OECD food inflation figures over 30 years. In almost any period we pick during the 30 years we find food inflation in Australia has been much higher than in the rest of the world. Then there is the recent World Bank comparison. It found that Australia is the most expensive nation of all G20s, and out of 177 countries around the world we are the fourth most expensive economy.

Why is this so? Why is this happening? It is simply due to our highly concentrated market. A highly concentrated market gives market power to the major retailers to screw rebates off their suppliers. We have seen that happen. We have seen that recently with the collapse of Rosella foods, where the receiver talked about one of the reasons for the collapse of Rosella, saying:

… the demands of both supermarket chains through rebates contributed significantly to Gourmet's dire financial state.

But thankfully we are finally getting some movement in this area. We have seen the ACCC commence proceedings against one of the major supermarket chains. Mr Rod Sims said the problem is that they are:

… capable of causing significant detriment to small suppliers’ businesses. This could have resulted in these businesses becoming less able to plan and less able to innovate in the market, with resulting reduced economic efficiency and consumer detriment.

(Time expired)