In the 11 years to the end of 2019, this average had fallen to 7.3 percent. In 2019 alone, it had fallen below 7 percent. The rate has risen in the past six months as unemployment has fallen to a 48-year low, but is still below the 2002-08 rate.
Another measure is the creation of new companies that employ people.
According to research, the rate of new business entry has fallen from 13% in 2005-06 to 11% in 2018-19. At the same time, the number of businesses closing has decreased.
Higher turnover in companies is usually associated with older, more established companies succumbing to competition from cheaper, smarter startups.
The market share of the top four companies in particular industry sectors has increased since the turn of the century, and Leigh noted that in industries ranging from baby food to beer, the top four companies have a high and growing share of their respective markets.
Common holdings among large companies could make the situation even worse. The largest shareholders in Commonwealth Bank are also the largest shareholders in the country’s three other major banks.
Business turnover in the top four in each industry has slowed over the same period.
The increase in market share has allowed companies to increase their profits. Average company markups have risen about 6 percent since 2003-04.
Margins typically need to be relatively small if companies are facing strong competition.
Leigh will reveal that around a fifth of the slowdown in productivity growth in Australia since 2012 was due to increased market power.
He will say that the drop in productivity is being felt in the wages of ordinary workers.
“Slower productivity growth means lower real wages and less purchasing power for households. It restricts the budget’s ability to build infrastructure and help the poor here and abroad,” she will say.
“Whether your priority is paying down debt or improving teacher quality, you should be concerned about falling productivity.”
Leigh says competition issues need to be considered in future government regulation, noting that next week’s jobs and skills summit will look at ways to link workers to new jobs faster. Those issues will likely appear in the summit’s white paper due next year.
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