The Australian supermarket sector continues to be dominated by a duopoly of two firms: Coles and Woolworths. There is increasing evidence that this duopoly has used its market power to propagate and magnify recent inflationary shocks.

Supermarket profits have increased in recent years and there is now evidence that margins have also increased. Food retailers are an important and significant part of household’s weekly expenses, with low-income households spending a bigger proportion of their income on food. This means that food inflation is a particularly important pain point for Australia’s
most vulnerable households.

The current cost of living crisis makes investigating the lack of competition and pricing behaviour of food retailers very relevant. We hope the following insights and policy recommendations will be useful to help reform this essential market.