Executive Summary

In the last decades, the growing trend of rising market concentration around the globe has created key concern as many industries become less competitive and more concentrated. Similar  observations have been noted in the Australian economy where big firms are usually dominating the market. This paper examines the increasing market concentration in the Australian economy by taking into account the things that influence its existing competition, naming industries that have become more concentrated, and the effects of such economic trends. Two major factors found to make the Australian markets weak are economies of scale and heavy regulation. Not so many industries have contributed to the growing market concentration and Manufacturing takes the first spot. Lastly, as detailed in the last part of the paper, there are three primary areas impacted by the rising market concentration in Australia. These include productivity, profitability, and wage growth.

Introduction

Through the use of Herfindahl–Hirschman Index, the Australian economy can still be considered as competitive. It scored with lower than 0.23 for over 90% of the industry and smaller than 0.04 for over half of the industry (Bakhtiari, 2019). It was claimed that a significant change in market concentration that can harm competition and restricts firm entry spurs concern for job creation and future growth of the economy. The focus of this report is to show the effects of increasing levels of market concentration on the Australian economy by looking at highly concentrated industries.

In the modern economy, high competition or competitive pressure is equated to good economic performance. It prompts firms to be innovative and utilise resources to their best use. However, in the past years, Australia and other countries around the globe have been worrying that competition is not as healthy as it should be. More specifically, big concerns were expressed over findings showing that industrialised nations have been controlled in the hands of fewer firms. The concept of market concentration is very essential as it is taken as a proxy measure of the intensity of competition in an economy. In Australia, has competition weakened? If so, how? Which industries have turned more concentrated? The report will address these questions.