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Turning a blind eye to the battlers

20 February 2015

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Former Federal Opposition Leader Dr John Hewson AM is Professor and Chair in the Tax and Transfer Policy Institute at Crawford School of Public Policy.

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More needs to be done to help people meet the cost of living, writes John Hewson.

Politicians always promise to improve the cost of living, but rarely do much about it. Indeed, it is probably the most conspicuous, and consistent, of all ‘broken promises’.

Sure, from time to time, they do deliver tax cuts, benefit increases, and even, at times, some new benefits and beneficial initiatives. Most recently, Australia’s Abbott Government delivered some hip pocket benefit, by lowering, or maybe only holding down, electricity costs, by meeting its promise to abolish the carbon tax. However, most would believe they haven’t yet seen the ‘full promised benefit’ of about $550 per household.

Speaking generally, most families struggle from one week to the next trying to make ends meet, a task that becomes even more difficult if they feel their jobs are at risk, and is compounded by business and political uncertainties.

How is it that the cost of living is so often defined and accepted as a top tier issue, yet so little is actually done about it?

There are several explanations. For example, I’ve heard it said, at the political level, that actually there is not much that our political leaders can do to directly influence the major components of the cost of living, as they are heavily concentrated in the hands of a few large companies that dominate the market.

That is, to an economist like me, an admission that so-called ‘competition policy’ has failed.

It is certainly true with supermarkets, where ColesWorth account for about 85 per cent of the market. It’s also true with electricity and gas, telecommunications, petrol, and banking.

These are areas where the general public widely believes that they are simply being ‘ripped off’! And they mostly are! The major companies in these areas are able to make excessive, sometimes even obscene, returns at the expense of the average consumer.

Most disturbing, these are areas where governments have, by design or default, policy or neglect, facilitated the concentration of this economic/pricing power. Sometimes governments have simply turned a blind eye. On other occasions, they have failed to put appropriate regulatory structures in place, and/or failed to impose/enforce those regulations and significant penalties for breaches.

This is a corruptible aspect of government, where these large corporates can exercise hidden and undue influence over government decision-making.

One thing a committed government could do is to open up these industries to full transparency and accountability, exposing their true returns, and identifying how they have constrained, or eliminated competition.

For example, although we are now seeing new competitors such as Aldi and Costco, and others, in the supermarket arena, so much more can be done to limit the power of ColesWorth, and to make it so much easier for new competitors to emerge – everything from planning rules, to even forcing some divestment.

I have been amazed at how sensitive governments have been to the issue of electricity and gas prices, yet how easily the three major retailers have been able to achieve and maintain such excessive margins via their influence over government. So too with petrol, telecommunications, and banking.

Over and above these costs, governments compound the financial struggle of most families by adding a host of their own charges, ranging from car rego and insurance, through highway tolls, penalty charges for traffic infringements, and parking fines, to rates and land taxes.

And finally, governments provide inadequate assistance in important areas such as childcare.

Now that Abbott is promising ‘Good Government’, and to ‘socialise’ before he ‘finalises’ policy, he could well start with a genuine program to assist battlers with their cost of living!

Read more about Economics and finance at Policy Forum. Turning a blind eye to the battlers was published at Policyforum.net – the website of the Asia and the Pacific Policy Society.

This piece was first published in Southern Highland News.

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