NAB and Woolworths chairs point to fierce competition amid gouging debate
By Millie Muroi
The chairs of National Australia Bank and Woolworths have rejected claims competition is lacking in key industries, saying while some sectors are concentrated, banks and supermarkets have faced increasing competitive pressures.
At a conference in Melbourne on Thursday, NAB chair Phil Chronican said many industries, including banking, airlines and supermarkets, had few competitors, but that banks had faced “massive competitive pressures” over the years.
Woolworths and Origin chair Scott Perkins and NAB chair Phil Chronican at the ACSI conference in Melbourne.Credit: Tim Mullane
“Interest margins today are about half of what they were 20 years ago,” he said. “It’s true that it’s competitive, but it’s also true that there is a high degree of concentration.”
It comes amid scrutiny of major players in concentrated sectors, with the Australian Competition and Consumer Commission (ACCC) last year finalising an inquiry into bank deposits, and this year examining the pricing practices of supermarkets.
Origin and Woolworths chair Scott Perkins said it was board leaders’ duty to act in the best interest of the corporation, which required thinking more broadly than just customers, shareholders, or the community.
“When you get that balance right, the flywheel works in the favour of everybody. We’re now assessing the right balance in a world where we’re under increasing scrutiny.”
However, Perkins said Woolworths’ profitability was “something to be proud of, not something to be apologetic for,” and that some of the scrutiny levelled at companies required “a little bit of evidence base.”
Perkins noted the ACCC found supermarkets to be competitive in 2008 when competitors such as Aldi had a significantly smaller store presence, and that it was important to foster a business environment that encouraged capital investment and investment in people to improve productivity.
“The big challenge for in the Australian economy at the moment is labour productivity. That ultimately leads to the ability to pass on lower prices and be more competitive.”
In February, former ACCC chair Allan Fels said weak and ineffective competition was the cause of high prices in Australia, and that granting the watchdog powers to call for the break-up of corporate giants would act as a “big stick” against anticompetitive behaviour.
However, Chronican on Thursday said the focus should be shifted away from the number of participants in a market.
“Competition shouldn’t be measured by the number of participants in it, but by the outcomes, which are prices, competitive margins...and whether there are artificial barriers to competition,” he said, noting companies such as Qantas were facing competitive pressures.
“There’s a lot of criticism of Qantas using its market power to hold up fares,” he said. “But progressively over the last year, as we’ve seen more foreign entrants getting into the international travel market, prices have firmly come down. That’s market competition at work.”
Speaking about the review of the Food and Grocery Code of Conduct, which details how the relationship between suppliers and retailers should work, Perkins said he would welcome some change in regulations.
“Nobody’s perfect,” he said. “We’ll learn from it. There’ll be things that we’ll be very proud of, and there will maybe be things we’re disappointed with. That’s the nature of it.”
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