There's Just No Competition In Australia

There's just no competition in Australia and consumers are ultimately the ones to suffer. Neither the government nor the agencies empowered by the government to curb anti-competitive behaviours by the predatory companies are doing anything about it. As they say, it's much better to hold shares in the Commonwealth Bank than to put your money in savings with them.

Let's start with the banks. On the same day the CEO of the Commonwealth Bank warned that interest rates may rise irrespective of the interest rates set by the Reserve Bank due to "higher funding costs", he also announced a record profit of $6.1 billion by the bank. The business model of banks used to be to borrow money from savers and pay them say 3% and lend the money to borrowers and charge them 6%. Nowadays, banks do more than just charge margin. They charge fees for a multitude of things like "account keeping", overdrawn account, handling fees, bad cheques, etc etc, some justified, some not and some even illegal. They also get involved with investing the money trusted upon them for safekeeping by investing in high risk investments which some go belly up like the "Storm Financial".

It may be harsh but I think the banks are just a bunch of thiefs. With the effects of the GFC and many families struggling to make ends meet, the banks are hurting those that are most vulnerable under the current environment, the battlers trying to put a roof over their heads. Now, a millionaire won't be affected as much if interest rates went up but lower to middle income families will and the banks have used the same old excuse of "rising funding costs" as justification for raising interest rates independant of the Reserve Bank. That's just plain wrong and neither of the big four crooks (banks) are able to show evidence that their funding costs have in fact risen. Not one iorta of evidence but they are still happy to announce record profit year after year after year. My level of economics doesn't go pass 101 but I would have thought the higher your costs went, the lower your profit would be as the facts never lie while the banks do.

Now let's get on to Coles and Woolies. There's no competition to this two big retail giants and the government is doing nothing to rectify that. Coles and Woolies account for 85% of the market share. Yes, that's 85%!!!! The rest of the 15% is shared amongst their other competitors like IGA, deli's and independant operators. What kind of price competition do you think consumers are going to get when there is lack of competition? Consumers are undoubtedly going to pay more for their groceries which will put more financial burden to those already struggling families.

Now I always thought that price fixing was illegal. In the USA, if the government could prove that you were even thinking of manipulating the price of goods, that was a serious crime and you could be put away for a long time. Yes, that's right, anti-competitive behaviour in America is a very serious offence and you could be hauled up before Congress to get a grilling. In Australia, nah....price fixing is a part of everyday life as common as a Vegemite sandwich. The worst offenders of price fixing are the Petrol companies. Irrelevant of the price of petrol in the international market, the prices moves in mysterious ways. It's usually more expensive during the weekends when more people tend to fill up and less expensive usually on Tuesdays and Wednesdays where less people tend to fill up. The grocery companies (Coles and Woolies) understand anti-competition so well that they in turn have jumped on the bandwagon (apart from their own) and gotten some action in the petrol market by partnering with Shell and Caltex by offering discount dockets at the bowser if you shop at their grocery stores. The scam though is that while the docket offers you a discount when you fill up in the petrol stations, those petrol stations that partner with Coles and Woolies usually price their fuel a couple of cents more than independant operators thus negating what you would save from the discount. What a sham, what a scam and the Anti-competitive watchdog ACCC says they have done nothing wrong.

Why are our taxes funding these useless watchdogs anyway when they seem toothless to get tough against these big oil, grocery and financial companies who are so clearly ripping consumers off? While the American congress rips through the directors of a failed financial venture between an Australian and American company, their Australian counterpart ASIC stated that the investors who decide to venture into a high risk investment should have and would have done their due diligence before putting their money into it, even though it was evident to them that most of the investors are just ordinary mom and pop investors without much sophistication in financial markets. If someone wanted to cheat or mislead you into buying a dud financial product, no matter how much due diligence you should be doing, you would expect the financial watchdog to ensure that those accused of cheating are hunted down and brought to justice, wouldn't you think. Not for ASIC though, they blame the investors and that is the end of that, how disgraceful and useless they are. There's almost no point having ASIC around at all.

Now I make all this criticism not just by the "arm chair critic" method although I am lying on my bed writing this piece. I have personally encountered how bad the watchdogs are in terms of protecting the consumers, first hand slug in the guts not only by the companies but ultimately by the final insult in the hands of the watchdogs. Firstly, was the dispute I have had when purchasing my current house. It was riddled with promises to rectify problems unfulfilled by the vendor which the realestate agent told me was done but I founf out later was not. I made a complain with the Real Estate Regulatory Board and they took 3 months to "investigate" and returned a verdict of insufficient evidence. Now, we all know not all dealings during the process of buying or selling a house is done in writing but I thought I had sufficient evidence in writing (not all) while the circumstantial evidence was overwhelming against the real estate agent but the final verdict was not even a slap on the wrist for the agent.

The other case was when I went to a grocery shop and found out that the proprietor had altered the "expiry date" a year forward I was flabbergasted, took a picture of the "evidence" (learning from the real estate experience) and proceeded to forward that with an official complain to the "Consumer Protection Agency". They told me that it was not their jurisdiction and referred me to the "Food Authorities". I took my complain up with them but to my annoyance I was in turn referred to the local council. You try to do the right thing but neither of the authorities were bothered at all to do the right thing by the people.

I'll end this blog entry today with a little analysis on how tough Australian families are doing it today. While the Australian economy remains the envy of many OECD countries and Australians can be called anything but poor, a closer look will reveal that many families are doing it tough. There's no point in earning a lot of money when the high cost of living erodes your ability to save for the future.

Let's take an average family income in Australia and I'll be generous here, $80,000 p.a. At that income, say the family pays about $20,000 in taxes (federal taxes), assuming medicare included. I specifically put federal taxes in brackets as in Australia, there are three levels of government, federal, state and local and each greedy government want a slice of your hard earned money.

Anyway, after taxes then the take home pay of the family is hence $60,000. Now the average mortgage for the average family is about $2,000 per month or $24,000 per year. This means after paying off the mortgage the family has $36,000 left.

The average family would have an average of two cars. The running cost of running each car including insurance, licence fee, servicing, maintaining, fixing, change tyres etc. averages to be $5,000 per car or $10,000 for both. This leaves the family with now $26,000 left.

If you owned a home, you would have the local taxes like your rates, water and usage of electricity and gas. Rates and water conservatively would be aroung $2,000 per year (most are north of this) and electricity and gas say $1000 (for easy calculation, most households are more than this). Add maybe another $1,000 for maintenance of the home like plumbing works, cleaning, broken fence, door etc. and that leaves the family around $22,000 a year.

An average family has 2 kids on average and the school fees, uniforms, excursions etc. conservatively would be $2,000 each if they went to a government school, so $4,000 for two kids. Child care would be around $1,000 (after government rebates) assuming the mother (or father) worked part-time and the family did not use child care very often. That leaves $17,000 to take care of other stuff.

Now telephony (internet, mobiles, fixed line) could be around $1,000 a year. Lunch if say an average of $5 per day (not sure what you're going to eat with $5 but let's say on average) with two hundred working days is already $1,000 (remember this does not even include coffee, usually around $4 for a decent one). Groceries for an average family is around $200 per week or $10,000 per year. Say eating out is a luxury and the family did it only once a month or about $1,000 a year. That leaves the family only $5,000 left.

Don't forget, with that $5,000, the family will need to carefully divide their pennies to take care of medical insurances, pharmacy, outings, clothing, hair cuts, household purchases, sending money back to their ageing parents etc. You can forget about holidays and that pet their children always wanted or worse still forget about another child if they ever wanted one or worse still saving for retirement or a rainy day, there just isn't any savings for that now is there? Now you see why it is ever more important for the government to ensure that these rip off merchants called Coles, Woolies, Caltex and the Commonwealth Bank are brought into line to stop the massive fraud they commit on a daily basis against struggling Aussie families trying to make ends meet while the Commonwealth Bank executives have their annual meeting in a five star international resort with never ending announcements of record profits.

Will it be Labor or Libs on the 21st August?

On the 21st of August Australia will head to the polls to choose their government. It’s either going to be Labor or Liberals. While the Greens are contesting, they have never and are not a serious contender to be in power although will form part of the government if they join forces with the Labor party should they collectively win enough seats to form a government.

This election campaign has been one of the most uninteresting, void of ideas and petty election campaign in living memory. On the left corner is the current prime minister of Australia Julia Gillard who only became prime minister by dethroning the previous Prime Minister Kevin Rudd unceremoniously with the support of the factions and caucus, the first time in the history of Australian politics a first term sitting prime minister has been booted out of office. The last this happened was when Paul Keating challenged then Prime Minister Bob Hawke and won with the majority support of the Labor party. Bob Hawke was then in the middle of his fourth term in office. Many years later, Bob Hawke acknowledged that he would still have been prime minister if he only gave a minister’s portfolio to Graham Richardson who later shifted his and his faction’s support away from Bob Hawke to Paul Keating. What a dirty game politics is but that’s news to no one. What is particularly disturbing though is that the country’s future are in the hands of these politicians playing politics with our lives. On the other hand coming in from the right corner is the chauvanistic, foul mouthed leader of the Liberals Tony Abbot who we'll talk about a little later.

What happened between Julia Gillard and Kevin Rudd is anyone’s guess but the execution style and the swiftness in which it was carried out is coming back to haunt Labor from the torrent of unhappiness from one of the marginal states of Queensland where Kevin Rudd is from. A huge swing towards the coalition may be enough to lose the election for Labor. There’s also been a wave of cabinet leaks purportedly coming from cabinet members loyal to the ex-Prime Minister which has hurt Labor so badly that in one week the polls showed a swing of 6% away from Labor to the Libs, something not seen in living memory. To state that Labor suffered a bad week is nothing short of an understatement.

What the Libs and their leader Tony Abbot are really good in is not espousing good policies for the country but what Tony Abbot is a master at is of pointing out the mistakes of the Labor party and quite effectively at that if the polls are anything to go by. From the pink bats debacle to the school halls fiasco to the debt and deficit, to the climate change back down where Kevin Rudd described climate change as the “greatest moral challenge” and then suddenly backed down. With those kinds of rookie mistakes Tony was never short of ammunition. Labor on the other hand have been limp on debunking some of the criticisms of Tony Abbot’s by giving some clear perspectives like the school hall debacle constituted only 1% rort in the program while still not good was relatively small for a program so large which needed to be rolled out in a relatively short timeframe and maybe also that the debt will be paid back within 3 years ahead of schedule a debt which was needed to keep Australia out of recession, the only one in the major OECD countries to do so. They should also press home the point that while the debt is in the billions of dollars it only formed 6% of the countr’y GDP as opposed to some other countries around 90%.

The Liberal party want our vote. A party still operating under the guidance and legacy of former Prime Minster John Howard, Australia’s second longest serving Prime Minister behind only Sir Robert Menzies. A party that is having its third leader in as few years having executed the two before Abbot and is now acting holier than thou by criticising Labor for what they'd done twice before.

John Howard's influence within the Liberal party is still alive and strong. His trademarks are stamped all over the Liberal party where leadership issues are discussed very openly with him. Senior opposition figures like Joe Hockey and even Abbot himself have been known to seek his advice regularly. John Howard was given the boot by the electorate in 2007 when Kevin 07 defeated him. To add salt to injury he was also defeated in his seat of Bennelong which he had held since 1974 by newcomer and former ABC journalist Maxine Mc Kew. While John Howard and his merry men governed Australia for more than a decade and did a lot of good things, education lagged behind most OECD countries, productivity went down, the education visas were abused by international students, house prices soared uncontrollably high out of reach of most first home owners and the mining revolution was not re-invested for the community to benefit in the longer term. This was the man who introduced a big new tax called the GST and forced Work Choices down the throats of working Australians. This was the man who followed blindly the steps of his idol George W. Bush into Iraq and Afghanistan without doing his own due diligence of what we now know was trumped up and selective intelligence reports on the case for war. This was the man who refused to sign the Kyoto protocol and was a climate change sceptic. What made John Howard lose the election was not because he was an ineffective leader. Quite the contrary, he was a very strong leader, he remained unchallenged from within his party until the electorate finally decided enough was enough and gave John his marching orders. What made him lose the 2007 election was that he was unapologetic of his failings and his policies which were unpopular and his determination to push through the policies that he deemed were good policies no matter how much the electorate hated them. This is the man now being idolised by the leader of the opposition Tony Abbot. Paul Keating regularly refers to Tony Abbot as the “small John Howard”, linking Tony Abbot with the many unpopular policies of the Howard era.

What we have now is the Libs accusing Julia Gillard of being a fake and likewise Labor asking will the real Tony Abbot stand up referring to his ever changing stance on climate change, Work Choices, Paid Parental Leave and a slew of other policies which he has back flipped on. Labor’s point is that the real Tony Abbot will eventually come to the fore if he won the election and these promises are all made to make him look to be sensitive to the voice of the electorate. Let’s face it, Tony is under a no win situation here. If he listen’s to the electorate, he will be accused of back flipping from his past beliefs and if he doesn’t he will be accused of being like John Howard. I guess his days of being an arrogant senior member of the John Howard cabinet is coming back to bite him when he now needs the people to make him Prime Minister.

Let’s face it, Labor’s accusation of Tony Abbot being a phoney, back flipper, vote fisher who will do and say anything to get your votes is something like the pot calling the kettle black. All politicians do it. They have in the past and they will into the future. Until the intense media scrutiny modern day politics encompasses subsides or is eliminated, unfortunately you will never see a politician let down their guard and be honest and down to earth with the people. Politicians nowadays are so guarded against what they say and commit to as footage of the interview can be retrieved years from now to be used against them in the future although circumstances may have changed after all those years. Nope, you’re not supposed to change your mind and say anything wrong if you’re a politician. They need to watch every word uttered and ensure that the political correctness is checked and double checked by their media staff over and over again so no section of the vast community is “upset” by their comments. No wonder our politicians nowadays are so contrived and fake, always reading from a script prepared by their media people, never able to answer a question straight up instead always prefering to beat around the bush. When can politics change so that the people’s interest and not the politicians’ will be foremost important as the garbage we’re getting from our politicians is nothing short of repugnant? Will it be Labor or Liberals this 21st August? Who cares I say, they’re both doing an equally bad job.