When your weekly grocery bill jumped from $216 to $240 for a family of four, the government said it had your back. Starting July 1, new laws will ban supermarket 'price gouging' and fine Coles and Woolworths up to $10 million for charging excessive prices above their cost of supply plus a reasonable margin.
It sounds like a fix. It probably isn't.
The ban is politically convenient, which is partly why it appealed to Treasury. It targets the two big players, looks tough on big business, and lets the government say it's protecting families. But look at the actual economics and the policy breaks down.
First, the scope problem. Only retailers with revenue above $30 billion face the new rules. That's Coles and Woolworths. IGA, ALDI, independent grocers, and every other supermarket chain keep doing what they've always done. And here's the uncomfortable fact about a duopoly: even with regulators watching, they're still the only game in town for most Australian families. Scrutinising two companies doesn't create competition. It just creates the appearance of action.
But the deeper issue is what's actually driving prices. According to the Australian Bureau of Statistics, food inflation hit 3.1 percent in the year to February 2026. Meat and seafood prices rose 4.5 percent, with beef and veal up 13.5 percent and lamb and goat up 12.9 percent. That's not a supermarket margin problem. That's global demand for Australian red meat, driving farmers to sell overseas rather than domestically, and making domestic supply tighter and pricier.
Add wages. Supermarket staff, logistics workers, and warehouse operators have all seen legitimate cost-of-living pressures. When wages rise, costs rise. That's not greed; that's how labour markets work. Supermarkets don't absorb that cost. They pass it on.
Then there's the margin definition problem. The law says retailers can't charge 'excessive' prices beyond cost plus a 'reasonable margin.' Sounds clear. It's not. Supply chains are dynamic. Costs vary by location, season, and product mix. Do you factor in waste rates, which fluctuate week to week? Insurance costs? Labour productivity gains from new technology? The capital invested in refrigeration and logistics? These variables shift constantly, which means 'reasonable' is essentially undefined.
What happens next? Retailers face legal uncertainty. ACCC enforcement becomes contentious because no objective standard exists. Supermarkets respond by reducing investment in efficiency, slowing the rollout of automation, and delaying store improvements. Why innovate if regulators might claim your efficiency gains prove you were price gouging all along?
This is the blind spot of price regulation, whether it's called 'price gouging' or 'excess pricing.' Economists from across the political spectrum have long warned that direct price controls reduce competition, discourage efficiency, and can create shortages. They look good in a press release. They rarely work in practice.
Here's what would actually help: removing barriers to market entry so new competitors can challenge the duopoly. Streamlining food import regulations so consumers can access cheaper products from overseas. Reconsidering wage growth indexation in hospitality and logistics so cost pressures don't automatically feed into every price. Investing in supply chain resilience. These are harder conversations than a July 1 announcement, but they address the real problem.
Instead, Australians get political theatre. The government gets to say it's cracking down. The supermarkets will likely trim margins by 0.5 to 1 percent, enough to declare victory. And families will still notice their groceries cost significantly more than they used to.
That's not a fix. That's a performance.