The Australian economy has become increasingly dominated by powerful firms that extract “economic rents” from the system, according to economist Ross Garnaut. 

The market dominance of a few big firms has contributed to declining real incomes for workers, has made our cost-of-living crisis worse, and is undermining productivity growth, he says. 

Professor Garnaut warns that Australia needs a new policy framework to manage the reality of industries with too much power, and the Reserve Bank will have to acknowledge the truth about the nature of much of the profit-taking in this country. 

He said policymakers needed to realise how much the world had changed so they could develop new policies to deal with an increasingly unequal market economy. 

Garnaut made these remarks during the 2023 Bannerman Competition Lecture in Sydney on Wednesday evening, where he delivered a speech on “The economic public interest in a world of oligopoly”. 

He said policymakers needed to develop new policies to deal with an increasingly unequal market economy. 

He added that “economic rent” referred to income that was greater than necessary to attract the economically optimal amount of investment into an activity and that monopoly rent persisted when there was little or no competition in the supply of a good or service. 

Garnaut also highlighted that profits of mining, with economic rent contributing a considerable proportion, were larger than the whole of the rest of the economy in the final quarter of last year, the latest data available. 

He added that it was time for these developments to “enter the mainstream” of our discussion of Australia's economy and economic policy.

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