Skip to main content

We are all paying the price for a lack of competition in Australia

Australia - the high price we all pay for a failure of competition policy

The current cost of living crisis has meant that many individuals and families have cut back on discretionary spending, and this is particularly hitting the retiree community, where many are on fixed incomes.

The problem is that a complete failure of competition policy over the last 30 years or more has meant that there are simply a lack of competition in many of the areas that give rise to "unavoidable expenses" - this includes health, insurance, food and "government" services.

In the context of the recent debate about supermarket pricing, the Prime Minister indicated that he would not break up the current effective duopoly, because we were not a "Soviet country". That was simply a stupid comment, why limit your ability to react to uncompetitive practices if they exist, in the knowledge that even the US - a paradigm of capitalism - regularly enforces divestiture.

At the grassroots level, it difficult to understand how both Woolworths and Coles, with the benefit of size, still can't manage to out-compete local grocers, often in the in the same shopping, when it comes to fresh fruit prices. The simplest reason is that they don't feel the need to compete and it is they who set the prices.

Let's look at healthcare. One of the great concerns of retirees is having enough money set aside to pay the almost inescapable "gap" that will apply if they need significant medical care involving surgery. This is an area in which the everyday retiree has almost no knowledge or information when it comes to the medical procedures involved, the quality of any particular specialist or surgeon or how to assess the value or otherwise of the fees payable.

You are taught at school that one of the characteristics of a perfect market is "perfect information" and the health market doesn't come anywhere close to being a perfect market, particularly since specialist practitioners exercise control over supply (through medical practitioner boards), sometimes the demand for services and pricing is conveniently left for them to decide. In this environment, while the number of specialists who might "push their fees to the maximum" might be a relatively small number, abuse of market power nevertheless impacts general pricing. And the position with respect to specialist dentists can be even more deplorable when it comes pricing and comparability.

So, what do you do? Do you establish a website at a cost of $24 million (seriously!) which allows people to compare out-of-pocket fees doctors charge for specialist procedures so they could find the best deal and then find five years later that only 20 doctors participate out of a potential total of 36,000 are participating! It redefines failure in a fashion that only governments find acceptable..

Do you even contemplate requiring/mandating doctors to provide details? Apparently not. For many years the Australian medical Association was considered the "most effective union" in Australia and apparently it still holds significant sway. However, if the politicians did their homework, they might find that while GPs are still regarded with some affection by the general Australian populace, that does not necessarily extend to medical specialists. These are, somewhat understandably, the best paid professionals in Australia, but there have been repeated situations in the last few years where they have been seen to leverage their financial position at the expense of the patient. And this will continue until transparency improves or other measures are taken to improve the position of patients.

And what about the allied health areas - and let's not even get into NDIS which is an unmitigated financial disaster for taxpayers. Consider Eyecare - here we have an example of the great Australian habit of "pretend competition". The two dominant brands in optometry and optical dispensing are Specsavers and Luxottica. Never heard of Luxottica? That's because it operates under a number of brands - OPSM, Budget Eyewear, Laubman & Pank, Bright Eyes and Sunglass Hut. Separate brands will often appear in the same shopping centre and give the illusion that there is a vibrant, competitive market.

This approach extends to general insurance, where there have been significant premium increases in recent years and where some of the practices give you the impression that insurers can basically do what they like because they are under no competitive pressure. This includes quoting premium simply on a "last premium +20% approach", particularly for loyal customers, and quoting premiums which are a reflection of the individual's ability to pay rather than the individual risk taken on by the insurer.

There is not the slightest indication that we have a vibrant, super competitive insurance industry and that's because the Government and regulator has failed to ensure that we don't reach levels of concentration in the industries that are anti-competitive. Note that only four companies have more than 70% of the general insurance market - with Suncorp operating under the following brands; AAMI, GIO, Bingle, Apia, Shannons, TerriScheer, CIL, Vero and Essentials by AAI, while IAG operates Buzz, CGU, NRMA, RACV, SGIO, SGIC, WFI, Swann Insurance and Lumley Insurance. All these brands give the appearance of competition but deliver no substance - the market continues to operate in an oligopolistic fashion. And just now the Treasurer has approved the takeover of Suncorp by ANZ Bank, and that's obviously going to improve competition - an aawful decision but consistent.

Finally, we have the incredible situation where federal and state governments, for no good reason other than a desperate need for cash or occasionally ideological zeal, have sold monopolies to private companies. Regardless of whatever regulations are put in place, no public service monopoly should ever be placed in the hands of a private corporation. How has the public benefited from the privatisation of our major airports - except through payment of parking and other service fees that have exceeded the rates of inflation in the intervening period - and why would any thinking individual with a "thought for the long term" privatise the Births and Marriages and Land Titles registry, as happened in South Australia. These are public, not private records and the public can look forward to higher fees and restricted access.

Given the above, and the over concentration apparent throughout large areas of Australian industry, why would the government not contemplate using divestiture powers to introduce more effective competition, or use the fact that it is the "final bill payer" in much of the medical segment, to introduce greater transparency around charges levied by medical specialists. Alternatively, we could consider the Canadian approach - where the government becomes the only purchaser of medical services.

This would take some political backbone, but that, like competition policy, has been lacking over the last 30 years. And for those whose first thought is more regulation, that might be part of the answer but try and name a truly effective regulator? Self regulation in Australia has become synonomous with "no regulation".