Different Market Structures in Australia

Discuss about the Monopoly Market Structure in Australia for Australian Banking Industry.

An oligopoly market structure is very usual in the context of Australian. Maximum service industry like banking, retail etc. follow the market structure of the oligopoly. The grocery retail sector in Australia is a core example of the duopoly, a narrowed version of oligopoly (Chung, 2015). Moreover, the banking sector of Australia is a proper example of an oligopoly. The main feature that the oligopoly market structure follows is, in this type of market few firm operate as a sole authority in a market (LaFrenz, 2014). In the case of monopoly, there is only one seller who rules the whole market and business as well. The monopolistic competition involves firm competing strongly among them in an industry. They do not allow any other organisation to enter the market. The Australian Post is a major example of monopoly market structure. Banking and Retail sectors are the key examples of monopoly market structure (Welch & Welch, 2009).

Apart from the banking industry, the retail industry in Australia faces very strong competition. The giant monopolistic retail companies named Coles and Woolworths have grabbed maximum market share in the industry. It is being very difficult for all other small and big organisation to sustain in the market. It is surveyed that, the banking industry of Australia is facing strong competition or oligopolistic war. Smith (2015), has informed that the existent incumbents in the banking industry are strictly prohibiting the other new entrants for the sector (Smith, 2015).

Firstly, in the case of the oligopolistic market, there are very few banks who operate in the banking industry of Australia such as Commonwealth bank of Australia, ANZ Bank, NAB Bank and Westpac (Gribbin, 2016). These firms are potential in nature and they always try to maximize the profit. In the maximum cases, the oligopolist firms become successful in acquiring abnormal profit. The retail industry of Australia is very particular. No other entrant in the industry is as potential as Coles or Woolworths to enter the market. Recently, some international companies like Aldi etc. tried to enter the market but failed to become successful (Jones, 2011). However, it is being tougher day by day to sustain in the banking industry. These four banks operate into the market and divide the profit share among them. During 2003-04, these four major banks together have fetched 400 million dollars by accomplishing a maximum of total assets, mutual funds etc. (Padley, 2013). Evidence claim that this competitive structure in the banking industry ultimately supports the growth factor of the industry and the country as well.

Conclusion

Entering to the banking industry is bit difficult because huge capital investment is needed. Four major banks of Australia operate in a mutual manner and shareholders invest where they find that investing will be fruitful. Besides, in the case of the retail sector, people choose any one of two giant companies (Yeats, 2015). This perfect case of a duopoly in grocery retail sector in Australia actually harms the whole marketplace (Wall, 2014). The maximum population in Australia have been earning by running a small retail business. The presence of huge facilities of buying a different kind of goods under one roof attracts people. Instead of buying goods in a small ‘bazar’ they prefer going in the supermarkets. (Kitney & White, 2013).

Both the banking sector and the retail sector concentrate more on these duopolist and oligopolist firms. This unfair competitiveness in this sector ultimately causes a deadweight loss in the Australian economy. This factor brings many negative aspects to the Australian economy (Wetzstein, 2013).

In the case of monopoly, the Australian post is the most important example to consider. The postal service in Australia is so strong and active that no other entrant in the country can get the access to the market. The monopolist always acts as a price maker and rules the whole industry (Wetzstein, 2013). Monopoly business cannot be established on a long-term basis by a sole individual. Once upon a time, the Amul was the sole supplier of the butter in the world and tried keeping its position but after a certain period of time, few other organisations like Nestle etc. started selling butter. The market has shifted from monopoly to oligopoly. However, monopoly examples can randomly be seen in countries where the government plays the role of a monopolist (Crew & Kleindorfer, 2012). The postal service of Australia is a governmental authority and a monopolist for the particular zone too. Water supply authority in Australia is another example of the monopoly in the country.

The postal industry of Australia has been provided the authorisation of peddling letter post in the country. This authorisation was given by regulating an act in the year 1989 (Crew & Kleindorfer, 2012). The government is playing as a monopolist in the postal industry because it has all the authorization to pass an act. Also, the service provided by this authority is very fast and impressive. It becomes possible because the government has successfully managed things systematically. Being a sole authority the government easily influences the price of this service. It is observed that during any occasion the price of posting a letter becomes higher. This price hike is not negligible and 43% is the rate (Crew & Kleindorfer, 2012). It becomes tougher for a particular group of people to afford the price.

References

Conclusion

However, this form of economic competitions has both the positives and negative aspects. In the case of the oligopolistic competition in the banking industry, the result is bit supportive. Due to this competitiveness, these four banks have grabbed the whole market share and no other banks exist. So the option for this service is limited to the people. As a result, no fraudulence cases have occurred because these four banks are trustable. It lowers the possibility of occurrence of cheating and fraudulence activity. Money transaction from a well-known bank does not create any mess. While in the case of the retail sector, this oligopolistic competition harms the economy by carrying the deadweight loss.

In the case of postal service of Australia, people over there enjoys very fast service. Besides, being a monopolistic entity, sometimes the authority charges a higher price which is not affordable for the citizens. Sometimes it creates difficulty for the people. Due to lack of options the people have to go for the existing opportunity.

References

Austrade Government, 2016. why Invest in Australia. [Online] Available at: https://www.austrade.gov.au/International/Invest/Why-Australia/Growth
[Accessed 26 05 2016].

Chung, F., 2015. Supermarket monsters: How Coles and Woolworths suffocate us. [Online] Availableat:https://www.news.com.au/finance/business/retail/supermarket-monsters-how-coles-and-woolworths-suffocate-us/news-story/c901feb4f6c255d3a6b613140cbea30c
[Accessed 13 08 2016].

Crew, M. & Kleindorfer, P., 2012. Managing change in the postal and delivery industries. UK: Springer Science & Business Media.

Gribbin, C., 2016. ANZ, NAB, Westpac, Commonwealth rule out passing ASIC levy increase on to customers. [Online] Available at: https://www.abc.net.au/news/2016-04-21/one-of-big-four-banks-rules-out-passing-asic-levy-to-customers/7344092
[Accessed 13 08 2016].

Jones, E., 2011. Coles and Woolworths duopoly hard to swallow. The Conversation, pp. https://theconversation.com/coles-and-woolworths-duopoly-hard-to-swallow-533.

Kitney, D. & White, A., 2013. We are an oligopoly economy: Robb. [Online] Available at: https://www.theaustralian.com.au/business/companies/we-are-an-oligopoly-economy-robb/story-fn91v9q3-1226699531519[Accessed 13 08 2016].

LaFrenz, C., 2014. The supermarket duopoly is starting to fray. [Online] Available at: https://www.afr.com/personal-finance/shares/the-supermarket-duopoly-is-starting-to-fray-20141114-11n8m4[Accessed 13 08 2016].

Padley, M., 2013. Oligopolies as safe as money in the banks. [Online] Available at: https://www.smh.com.au/money/investing/oligopolies-as-safe-as-money-in-the-banks-20130916-2tvlk.html[Accessed 13 08 2016].

Smith, M., 2015. The death of the oligopoly: Australia’s incumbents face new rivals. [Online] Available at: https://www.afr.com/brand/chanticleer/the-death-of-the-oligopoly-australias-incumbents-face-new-rivals-20150421-1mq11b[Accessed 11 05 2016].

Wall, A., 2014. Supermarket wars – a tale of the Australian duopoly. [Online] Available at: https://foodmag.com.au/supermarket-wars-a-tale-of-the-australian-duopoly/
[Accessed 28 04 2016].

Welch, P. & Welch, G., 2009. Economics: Theory and Practice. Hoboken: John Wiley & Sons.

Wetzstein, M., 2013. Microeconomic Theory: Concepts and Connections. Abington: Routledge.

Yeats, C., 2015. Competition, rising costs, regulation: why Australian banks are finding it tough. [Online] Available at: https://www.smh.com.au/business/banking-and-finance/competition-rising-costs-regulation-why-australian-banks-are-finding-it-tough-20150507-ggw6cw.html[Accessed 11 05 2016].