Ideas@TheCentre
End exploitative practices in the outback
The Australian recently reported Indigenous Affairs Minister Jenny Macklin’s scathing response to the loan shark who plagues outback communities by charging up to 50% interest on loans and taking bank cards and PIN numbers for direct access to bank accounts. But Macklin might do well to look into some of the unsavoury practices going on in her own backyard.
Macklin is federal minister for the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA), which now has responsibility for administering the Outback Stores Company. Originally set up to help improve the operation of remote community stores, the company has been accused of being anti-competitive and creating an artificial marketplace by making preferential deals with a limited number of suppliers (one for dry goods and one for variety items).
Under the Outback Stores initiative, stores continue to be owned by Indigenous communities but are managed by the Outback Stores Company, which operates on a fee-for-service basis. There are 27 Outback Stores in remote communities across Australia. Helping run these stores are 46 head office personnel. Typically, the stores employ two staff members, and managers earn upwards of $55,000.
The Outback Stores Company claims that all profits from the stores go directly to the communities. But with all the people employed to manage the company, it is not surprising that very few stores return a profit.
Despite declarations on its website that it looks for the most affordable supplies of grocery items, the Outback Stores Company seems to be more concerned with getting higher rebates (or kickbacks) from suppliers than lower grocery prices for its customers.
A promised tender process never eventuated, so Tim Cross, a wholesale supplier whose company has been supplying goods to remote stores for 18 years, submitted an unsolicited proposal, only to be told that even if his pricing was cheaper, his competitors were offering a higher rebate.
The rebates appear to help pay for the excessive number of head office personnel and rarely translate to lower prices. The mark-up on goods is taken from the amount paid for an item – so if something costs $1 more, it is passed onto customers. Such practices penalise the very people the Outback Stores Company professes to help.
Just as Macklin intends to vigorously investigate the loan shark operating in outback communities, so should she investigate the practices employed by the Outback Stores Company. As she herself pointed out, ‘Any exploitation of vulnerable people is appalling ...’
Sara Hudson is a Policy Analyst with the Centre.
