Corporate Control

The Impact of the Oligopolistic Australian Market Structure on its Economy

W. H. Johnston

Despite sacking a fifth of its workers and accepting over $2 Billion from fiscal stimulus such as JobKeeper during the pandemic, Qantas has announced profits of more than $1.4 Billion. A large amount of this profit can be attributed to the astronomical increase in ticket prices, with an economy seat to London increasing its price by over $1000 since 2019 ($1305 in 2019 – $2431 in 2023). While there has been clear reason to increase the prices in the last 4 years, with reduced flying in the pandemic inducing higher costs per flight, and fuel prices skyrocketing from the Russia-Ukraine conflict, the disruptions hardly warrant such a steep and prolonged price hike. 

Qantas CEO, Alan Joyce, claimed that the recorded profits were to be reinvested for the benefit of customers and that there would be eventual “downward pressure” on prices, however, the fares are expected to fall nowhere close to the pre-pandemic levels, despite the downward trend of ticket prices over time. 

Unsurprisingly, there has been substantial public backlash, with Labor senator Tony Sheldon claiming, “There’s nothing to celebrate in Qantas making massive profits by ripping off customers with extortionate airfares during a cost-of-living crisis,” coming at a time where Qantas does not require any more time in the limelight during the ongoing High Court case surrounding the unlawful outsourcing of 1700 jobs during the pandemic.

This corporate exploitation of consumers has become somewhat endemic to the Australian economy, as recent studies suggest that a disproportionate amount of inflation in Australia is being caused by increased corporate profits, rather than wage growth. This is largely due to the lack of competition faced by large Australian corporations, with many sectors dominated by duopolies or oligopolies. Alan Joyce commented in a recent interview that, “There’s plenty of competition. Qantas cannot dictate the airfares of the market,” yet just three airline companies, Qantas, Jetstar and Virgin are responsible for over 90% of domestic air travel, with Qantas occupying ~40% of the market share in July 2022. The same is true for residential broadband companies, with three companies; Telstra, Optus and TPG occupying over 80% the market share, and most notably, the two largest grocery companies, Coles and Woolworths occupy 65% of the market share of a largely independent sector.

The product of this market control by large corporations is the fallacy of competition, as in reality, the companies which dominate the essential industries can manipulate their prices as much as they would like without a large change in demand for their products, and while institutions such as the ACCC are in place to prevent this taking place to the extreme, the large companies operating in oligopolistic industries are still able to push the boundaries to extract as much profit as they can. 

Therefore the record profits acquired by Qantas through perceivably extortionate price hikes and morally questionable release of workers, characterises the possibly damaging control of large domestic corporations over their own workers, the Australian consumers and the Australian economy.