Living costs for average working families are growing well above inflation, highlighting the impact of high interest rates and sharpening criticism of the prices charged by supermarkets, power companies, insurers, banks and other powerful businesses.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
While inflation slowed to an annual rate of 4.1 per cent in the December quarter, Australian Bureau of Statistics figures that also take into account mortgage interest charges found living expenses for all households except self-funded retirees outstripped the consumer price index, indicating the breadth and extent of current price pressures.
The biggest hit was to households paying off a mortgage, whose costs grew 1.1 per cent in the December quarter to be up 6.9 per cent over 12 months, almost 70 per cent more than inflation.
Costs for recipients of benefits other than the age pension grew by between 4.8 and 5.2 per cent, and for age pensioners, 4.4 per cent.
ABS head of prices statistics Michelle Marquardt said all households were hit by big cost increases in insurance, housing and food, but those with a mortgage experienced the steepest increase due to a 40 per cent leap in home loan repayments through the year.
The analysis provided a sobering backdrop to findings by former competition and consumer tsar Allan Fels of significant price gouging and overcharging, particularly in sectors with high levels of market concentration including grocery, energy, aviation, banking and financial services.
Professor Fels, whose inquiry was commissioned by the Australian Council of Trade Unions, said there had been "a dramatic increase in costs paid by consumers" in recent years.
"Australians are paying prices that are too high, too often," he told the National Press Club on Wednesday.
Professor Fels said the higher prices being set by businesses were causing "real hardship and sacrifice", adding to inflation and driving up the profit share of growth.
He said many of the 750 submissions received by his inquiry detailed the deep impact high livings costs were having on many, including being forced to skip meals, forego medical treatment or delay replacing badly worn clothing and footwear.
Instances of price gouging and overcharging were most prevalent in markets where there was little or no competition such as supermarkets, electricity and gas, aviation, banking and insurance, the former Australian Competition and Consumer Commission chair said.
"Some of the highest price increases occur in sectors which are characterised by having disproportionate market power, a level of power over their consumers, or a level of monopsony power over their supply chain and workforce," he said.
Professor Fels said current arrangements offered little to protect consumers.
"Unreasonably high prices are not prohibited by competition law," he said. "Firms are free to charge as much as they like. They can price gouge lawfully as long as there is no unlawful collusion."
While the federal government has ordered an ACCC inquiry into supermarket pricing, Professor Fels said the consumer watchdog only had the power to police unlawful anti-competitive agreements and could do nothing about excessive prices.
READ MORE:
He said consumers were being particularly let down by a lack of competition in key sectors.
"Competition is far less than it should be in Australia. This weakness provides a platform for many sectors to overcharge by setting prices above the levels that would occur in a more competitive market," Professor Fels said.
To address this, he recommends a suite of changes including establishing a Competition and Prices Commission empowered to investigate business pricing decisions and restrictions on competition, making it an offence to charge excessive prices, introducing a divestiture law to force the breakup of big companies breaching competition law, overhauling the mergers regime, banning non-compete clauses and simplifying competition law.
"This set of recommendations, if adopted, would substantially improve competition and decrease the price pressure faced by ordinary families," Professor Fels said.