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'Adding insult to injury': Supermarkets record huge profits as Australians face cost of living crisis

Consumers continue to feel the pinch of soaring interest rates, stubborn inflation and high cost of living pressures as corporations announce billion-dollar profits from the past financial year.
Supermarket giants Coles and Woolworths recorded profits in excess of $1 billion with a nearly 5 per cent increase on the previous year.
A significant part of these profits are from the groups' grocery arms, with Woolworths seeing a nearly 20 per cent rise in earnings while Coles recorded a 2.9 per cent rise.
But the question lies in whether these major profits are coming at the expense of Aussies' own wallets.
Jim Stanford, economist and director of Centre for Future Work, told these billion-dollar profits are "absolutely" at the expense of the consumer during a time when budgets are already squeezed.
"For people who go to the grocery store and pay $200 for a cart, that's adding insult to injury," he said.
He said the two supermarkets have a "cosy oligopoly" in Australia and can price their products above and beyond what is required to cover their own costs due to a lack of competition in the market.
"They have increased their own bottom line," he said.
"There's no doubt supermarkets have profited from this inflation even as Australians struggle to put food on the table."
Coles and Woolworths both claimed the higher prices of products are to cover the margin between supply and demand, with both supermarkets recording a 6 to 7 per cent inflationary increase in grocery product costs.
Woolworths' group gross margin of 26.8 per cent is "driven by Australian food", the grocer said.
Coles' margin is 26.4 per cent, which was mostly driven by retail theft due to cost of living pressures, the supermarket added.
supermarket tactics end cap displays how to avoid
Coles and Woolworths recorded $1 billion profits from the 2023 financial year. (Getty)
But Stanford said supermarkets have more than passed on higher costs to consumers and added to their bottom line.
"You only need grade school math to realise if a company's profits grow, it means their revenue went up more than their costs," he said.
Consumer behaviour researcher at UNSW Professor Nitika Garg agreed with Stanford that supermarkets have a stronghold on the Australian market without major competition, meaning they can keep prices high and benefit from profits.
"Prices went up with crises but they haven't come down," she said.
"Consumers are now used to paying the increased price so (supermarkets) just say, 'Oh well, let's continue with it.'
"You are squeezing the consumer when you're no longer being squeezed."

It's not just supermarkets, there's a 'system-wide problem'

Airlines, energy suppliers, and banks are all fattening their bottom lines at the cost of Australians, Stanford said.
It comes as Qantas recorded a staggering $2.47 billion in profits before tax while Australia waits for banks, floated by increased interest rates, to post their full-year results.
"There is a system-wide problem arises because these companies have got huge market share, huge pricing power and it's not just consumers but their own workers and sometimes their own suppliers suffer because of it," he said.
Stanford said it started during the COVID-19 pandemic when companies took advantage of disruptions to "charge whatever the market would bear".
"Sydney, Australia - March, 14th 2012: Qantas aeroplanes and tail fin with the distant view of downtown Sydney - Sydney Airport"
Qantas posted more than $2 billion in profits before tax. (iStock)

But is it a result of cost of living pressures?

Inflation and interest rates are hot topic terms as Australia and the world face the post-COVID-19 pandemic economic headwinds, adding to a cost of living crisis.
Australia's inflation sits at 7 per cent, which the Reserve Bank of Australia said is driven by consumer spending including at supermarkets, wages and a low unemployment rate.
"More jobs and higher wages increase household incomes and lead to a rise in consumer spending, further increasing aggregate demand and the scope for firms to increase the prices of their goods and services," the central bank said.
And the bank's main task?
To bring down inflation through the only accessible tool of raising interest rates to 4.1 per cent to reduce consumer spending power.
But Stanford argued these powerful companies like supermarkets, airlines and energy companies are the ones raising inflation, not Australians.
"We're labouring under the myths that the problem is workers," he added.
"The RBA focuses on wages that they say are too high and the RBA says profits are not the problem ... that's completely at odds with the reality people face every day."
Data from the Centre for Future Work shows that 69 per cent of higher inflation in Australia was caused by higher corporate profits.
Stanford said it is "blaming the victim" - or the average Australian - for having too much in savings and spending too much to contribute to inflation and therefore higher costs from corporations.
"Wages haven't gone up as much as prices and Coles, Qantas and the banks have made higher profits than ever," he added.

What do we do about it?

Garg said the government and relevant regulatory bodies should be looking at supermarket margins and setting a price cap. 
"In other cases, you might want to collect taxes from companies that have made extra money and redistribute that money back to the consumers who have paid those high prices in the first place," Stanford added.
Stanford added there could be changes to competition policies to try and curtail power or break up large corporations and their stronghold on the Australian market.
"There's no magic bullet that instantly solves the problem," he added.

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