Australian food: Why is it so expensive?

I am fortunate to have recently returned from a holiday in France. While there I couldn't help noticing the much lower price of many foods. Croissants and brioches retail for less than 1 euro each ($1.40). Baguettes are very often sold for 0.60 euro ($0.85), although they may cost up to 1 euro in some stylish Parisian bakeries. Choosing wine from the well-stocked supermarket or hypermarket shelves can be mind-boggling. As a ‘middle of the road’ wine drinker I often assume that price is indicative of quality, so my problem when wine shopping in France is to choose from the hundreds of bottles with price tags ranging from 2 to 5 euros ($2.80 to $7). Even Parisian restaurants offer very affordable set price menus around 15 to 20 euros ($20 to $28) for both the main course and a dessert.

Coming back to the inner city suburbs of Sydney, I was again reminded how expensive Australian food is. The local baker sells any of the sweet croissants or brioches for around $3.50 to $4.50 and baguettes for $3.50 to $5. Cheese and wine prices are even more challenging to rationalise. A main course in any café or restaurant will set you back by $25.

There are a number of possible explanations for high Australian food prices. The most obvious one is that costs of production are much higher in Australia than they are in France. But official statistics tell us otherwise. According to the Australian Bureau of Statistics (ABS) productivity has increased since the late 1980s and labour costs in Australia are less than the highly taxed workforce in France. In 2008, the average gross annual income in France was around 47,000 euros ($67,000). Net income for the same year was around 24,000 euros. Income tax combined with social contributions of 49 per cent, meant the weekly average 2008 wage was 900 euros ($1285). In 2010, the average weekly gross earnings of Australian employees was $1010, 20 per cent lower than their French counterpart. 

If the Australian cost of labour cannot justify the higher retail food prices, could it be the cost of raw commodities on the price of the finished product? Both countries enjoy healthy local food production. France and Australia are wheat producers and exporters, both grow grapes, and both have a local wine and dairy industry. So, it is unlikely that production costs can explain the difference in retail food prices between these two countries.

We are told that competition is essential to keep prices low but could it be the case that competition amongst retailers becomes complacent when the watchdog is asleep? Could it be that Australia suffers from a ‘workable’ competition syndrome? A recent study by the OECD comparing food price inflation between Australia, the United Kingdom and France has showed that over the last 10 years (2000-2010) food price inflation in Australia was 43 per cent while it was around 37 per cent in the U.K. and 22 per cent in France. So why is food price inflation so much lower in France?

The answer: although food prices are not regulated in France, the government actively intervenes in the affairs of the retail industry by controlling anti-competitive practices and by coordinating efforts within the food industry. Although Australian politicians tell us that everything is done to encourage healthy competition within the industry, the fact is that it is very difficult for any government to foster a competitive environment without regulatory intervention.

Is consumer attitude also part of our answer? Could it be that tolerant consumers foster the practice of high food prices? Are we Australian consumers asleep? Is our understanding of food different from our European counterparts? Do we understand food as a luxury item and are happy to pay a premium for it, provided we can? Food should be respected as it is essential to our survival and its affordability will contribute to make Australia food secure.

It appears that the pricing of food is situated at the crossroads between the highway of ‘workable’ competition and the gentle path of tolerant consumerism. Food is not only essential for life but it brings pleasure and lubricates social interaction. Food plays an important role in our cultural identity and is one of the key agents for opening the gates of cultural diversity within a cosmopolitan city. We must wake up and not let unjustified expense ruin it all. The environment and our food producers must receive the respect they are owed. We may also want to be more circumspect with the people in-between the food producers and us and ensure that they don’t become the only ones to benefit from our essential need for good and nutritious food.