Firms would have been less able to use market power to push up prices and overall inflation had the government’s proposed changes to competition policy come into force three years ago, treasurer Jim Chalmers said.
Chalmers on Wednesday unveiled proposed reforms that would force firms to submit merger plans to the Australian Competition and Consumer Commission for approval. The size of the deals that will trigger the scrutiny will be set after a consultation period, with the government aiming to implement the changes by the start of 2026.
Groups such as The Australia Institute have blamed so-called price gouging by companies using their market clout for stoking the highest inflation in decades.
Treasury was among organisations to have shown prices were higher than they would otherwise have been because of “a lack of competition”, Chalmers said. Market concentration “can’t have helped” with inflation, he said.
“[I]f we can make our economy more productive, more competitive, more dynamic, more innovative, and give consumers more choice and workers more choice, we can put downward pressure on prices,” Chalmers told Guardian Australia.
The Reserve Bank was one of the agencies downplaying the role of market might in driving up inflation. Profit margins outside the mining sector hadn’t widened since 2021, it said in May 2023.
In his speech on Wednesday in Sydney, Chalmers said that “over recent decades, the mark-ups that businesses apply to goods and services have increased by more than 2 percentage points”.
More than 1400 mergers were recorded in Australia last year involving a “value of around $300bn”, he said. Only about a quarter, or 330, were scrutinised by the ACCC.
Some in the audience privately questioned treasury’s assumption the ACCC would continue to assess only about 300 mergers annually given it would cast its net wider and streamline its processes to speed-up decisions.
“It remains to be seen [if the number remains steady] but that’s our expectation,” Chalmers said: “The most important difference is we’ll have much more confidence it’s the right 300 rather than just a ‘hit-and-miss, spray and pray approach’ that relies on voluntary notification.”
Some firms, indeed, may even be deterred.
“I would anticipate that companies contemplating mergers will contemplate them differently,” he said. “This will put pressure on businesses to get their ducks in a row from a competitive point of view.”
As for the Coalition’s stance, Chalmers he had “not heard a whisper”.
“We flagged this change at the beginning of the week. It’s now Wednesday,” Chalmers said. “We have offered a briefing and we expect them to take that up.”
The shadow treasurer, Angus Taylor, said the proposed competition changes would not “restore the collapse in Australians’ standard of living”.
“This is a treasurer who is all spin and no substance,” he said. “It’s important the government doesn’t confuse competition policy with competitiveness of the economy. Labor’s policies on energy, [industrial relations] and tax are making Australia a less attractive place to do business.”
“We will scrutinise this to make sure this policy gets the balance right,” Taylor said.
Peter McDonald, a partner at Allen & Overy, said the proposals marked “a major change for merger control in Australia”.
“It will permanently alter how we assess and make merger filings – new thresholds will need to be assessed; new types of information provided; and new fees will be paid,” McDonald said.
“For larger companies and larger deals, the costs associated with merger control in Australia will increase,” he said. “However, from a substantive point of view, international practice tells us that this type of system can work, and work well.”
