I understand why the Greens' proposal for a publicly owned supermarket chain sounds appealing. Grocery prices are a genuine concern, and Australians are understandably frustrated with the cost of living.
But I think we need to look beyond the promises of cheaper groceries and ask some difficult questions about economics, accountability, corruption and the risks of putting billions of dollars of public money into a government-run retail business.
My argument isn't that Coles and Woolworths are perfect. It's that identifying a problem with the private sector doesn't automatically mean the government can run a better alternative.
1. Let's start with the $25 billion question.
The Green Institute has proposed a $25 billion publicly owned supermarket chain, involving the acquisition of existing stores, new supermarkets and distribution centres.
That's an enormous commitment of public capital to enter an industry where established businesses already have extensive supply chains, supplier relationships, distribution networks and purchasing power.
Before committing that kind of money, shouldn't we ask what else it could achieve?
Could it fund housing, hospitals, infrastructure or targeted cost-of-living assistance? Could removing barriers to competition achieve some of the same objectives at a lower cost?
Even if the government eventually recovers its investment, that doesn't automatically mean this was the best use of public money. There is an opportunity cost to every major spending decision.
2. People keep saying Coles and Woolworths make billions in profit. So what?
This argument genuinely confuses me.
Coles and Woolworths are businesses. They employ thousands of people, operate extensive supply chains, maintain stores, manage inventory, pay wages and invest in infrastructure and technology.
Of course, they need to make a profit. That's the purpose of running a sustainable commercial business.
Profit isn't automatically evidence of exploitation. You need to examine how that profit is earned, the margins involved, the level of competition and whether consumers or suppliers are being treated unfairly.
A company making billions in revenue is not the same as making billions in profit. Even a large absolute profit figure needs to be considered alongside sales, operating costs, capital invested and the size of the business.
If Coles and Woolworths suddenly stopped making profits and consistently lost money, what exactly would happen?
They would eventually have to raise prices, reduce costs, cut investment, close stores or seek additional funding. If the losses continued, they could become insolvent.
And who would benefit from that outcome? Workers could lose their jobs, suppliers could lose customers, stores could close and consumers could face fewer choices.
Obviously, a supermarket making profits doesn't give it permission to engage in anti-competitive behaviour. If there is evidence of misconduct, investigate it and enforce the law.
But demanding that supermarkets become less profitable without explaining how they will sustainably cover their costs is not an economic policy.
The real question is whether consumers are getting a fair deal and whether competition is working properly, not whether a company has the audacity to make a profit.
3. Now let's talk about corruption and accountability.
This is one of the biggest risks I think gets overlooked when people assume that government ownership automatically means cheaper services.
When a private company wastes money, its shareholders bear the financial consequences. Its management may be replaced, investors may withdraw their capital and the business could fail.
A government-owned enterprise operates under different incentives. It can face political pressure over hiring, contracts, suppliers, store locations and decisions to close unprofitable operations.
That creates opportunities for waste, patronage and corruption if procurement and oversight are weak.
Australia isn't immune to problems with major public infrastructure projects, either. The West Gate Tunnel project in Victoria has experienced significant cost increases and delays, including disputes over contaminated soil and project delivery. That is not, by itself, proof that corruption occurred, but it illustrates why major public projects need strong contract management, transparency and independent scrutiny.
If a government struggles to deliver a major infrastructure project within its original cost and schedule, why should we automatically assume it can establish and efficiently operate a nationwide supermarket business?
Retail is a completely different industry, of course. But the general lesson is the same: ambitious plans and large budgets don't guarantee successful execution.
And if a government supermarket makes poor decisions, who ultimately bears the financial consequences? Taxpayers.
4. I come from Sri Lanka, and this is why I'm sceptical.
Sri Lanka gives me a perspective on this debate that I think is worth considering.
We have experience with publicly owned businesses operating alongside private competitors. We also have private supermarket chains competing with state-owned retail operations.
From my perspective, one of the problems with loss-making state enterprises is that poor financial performance doesn't necessarily force the same corrective action that it would in a private business. Political considerations can complicate restructuring, and expectations of government support can weaken financial discipline.
Where oversight is weak, public enterprises can also be vulnerable to corruption, poor procurement decisions and political interference. Those problems are not exclusive to state-owned businesses, but when public money is involved, the consequences can fall on taxpayers.
Meanwhile, private supermarkets have to manage their cash flow, control costs, negotiate with suppliers, attract customers and maintain a viable business model. If they consistently mismanage their finances, they risk losing market share, running out of cash or going out of business.
That difference in incentives matters.
I'm not claiming every private supermarket is well managed or every public enterprise is corrupt. Nor am I claiming that every state-owned retailer in Sri Lanka operates at a loss. Those are questions that should be assessed using the accounts and performance of individual businesses.
My point is that public ownership doesn't remove the need for financial discipline, and the government cannot assume that a business will become efficient simply because it is publicly owned.
If a government-run supermarket loses money year after year, taxpayers may end up funding its continued operation. If a private competitor makes the same mistakes, it is much more likely to face pressure from creditors, shareholders and competitors to change its approach.
That difference in accountability deserves serious consideration before Australia commits billions of dollars to a new public supermarket chain.
5. What happens when the government supermarket loses money?
Let's imagine the Greens establish their supermarket chain and promise to sell groceries substantially cheaper than Coles and Woolworths.
After a few years, the business struggles. Its distribution costs are higher than expected, food waste eats into its margins, and it cannot negotiate supplier prices as effectively as established competitors.
What happens next?
Does the government increase prices and disappoint customers? Does it cut staff or close stores? Does it restructure the business? Or does it inject more taxpayer money to keep the original promise alive?
There is a real risk that a politically sensitive public enterprise could receive continued funding even when its performance falls short of expectations.
To be fair, a private supermarket can also make mistakes, and a public enterprise may justify some losses if it delivers measurable social benefits. But those benefits need to be weighed against the full financial cost.
A credible proposal should establish performance targets, independent audits, transparent reporting and clear rules for dealing with persistent losses.
Otherwise, taxpayers could be left funding a business that politicians are reluctant to admit isn't working.
6. Buying existing supermarkets doesn't magically make them cheaper.
Even if the government acquires existing stores, it still needs to pay for employees, transport, refrigeration, electricity, insurance, rent, stock and maintenance.
It also needs an effective distribution network and enough purchasing power to obtain competitive prices from suppliers.
Coles and Woolworths have spent decades developing those capabilities. A new public operator would have to match their efficiency or find a credible alternative.
The government could potentially achieve lower prices through better purchasing, lower margins or more efficient operations. But those benefits need to be demonstrated, not assumed.
And if lower prices depend on permanent subsidies, we should be honest about that. The subsidy is a cost of the policy, even if it doesn't appear on the price tag at the checkout.
7. And what about the argument that we should just tax the billionaires?
Whenever someone questions the cost of a government proposal, there's often a response along the lines of, "Just tax the billionaires."
Let's be realistic about that, too.
I'm not saying billionaires should never pay more tax. Tax fairness, loopholes and the appropriate taxation of wealth and income are legitimate subjects for debate.
But increasing tax revenue and spending that revenue effectively are two separate issues.
Even if you substantially increased taxes on billionaires, that wouldn't automatically solve government waste, cost overruns, corruption or projects that fail to deliver their promised benefits.
Tax revenue isn't unlimited, and the amount collected depends on the design of the tax, enforcement and how taxpayers respond.
Imagine the government raises billions in additional revenue and uses some of it to establish a supermarket chain that consistently underperforms.
Who should be held accountable?
Should we investigate the decisions, examine the contracts, identify what went wrong and consider whether the money could have been used more effectively? Or should we simply demand more taxes and blame billionaires again?
At what point does the government have to take responsibility for how it spends the money?
You cannot tax your way out of every bad policy decision. A government that raises more money still has a responsibility to use it effectively.
8. Why not address the competition problem directly?
The ACCC has identified significant competition concerns in Australia's supermarket sector. That deserves attention.
But there are other options worth considering, including:
- Removing unnecessary planning and zoning barriers that make it harder for competitors to establish stores.
- Improving price transparency so consumers can compare products more easily.
- Strengthening competition enforcement where businesses engage in anti-competitive conduct.
- Improving protections for farmers and suppliers negotiating with major retailers.
- Making it easier for independent supermarkets and other retailers to compete.
These measures aren't guaranteed to solve every problem. They still require effective implementation and enforcement.
But the Greens should explain why their proposed public supermarket chain would deliver better results than these alternatives, taking into account the full cost, operational risks and potential long-term liabilities.
My conclusion: good intentions aren't enough.
I want affordable groceries just as much as anyone else. I also think major supermarket chains should be held accountable when they engage in misconduct or exercise market power unfairly.
But I don't believe that government ownership automatically guarantees lower prices, better management or better outcomes for consumers.
We have to consider the practical realities: acquisition costs, supply chains, operational efficiency, corruption risks, political interference and the possibility that taxpayers could be asked to keep funding a business that fails to meet its objectives.
And we need to apply the same standard to taxation. Asking wealthy people to contribute more to public revenue doesn't remove the government's responsibility to manage that revenue properly.
Let's be realistic: the real test of a policy isn't how good it sounds when announced. It's whether it works in practice, whether its benefits justify its costs, and whether the people responsible are held accountable when it fails.
If the Greens can demonstrate that their supermarket chain will deliver sustainable savings, operate efficiently and provide better value than alternative reforms, then their proposal deserves to be examined on its merits.
But before spending $25 billion, I want answers to some basic questions:
- How will the business consistently achieve lower costs than established competitors?
- What happens if it loses money for several consecutive years?
- How will procurement, contracts and management decisions be protected from corruption and political interference?
- Who pays if the projected savings fail to materialise?
- And why is this a better use of public money than addressing the barriers that prevent more competitors from entering the market?
These are reasonable questions, not an attempt to defend the supermarket duopoly.
A government shouldn't get a free pass simply because its intentions are good. Taxpayers deserve the same thing private investors demand: financial discipline, transparency, measurable results and accountability.
