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The Australian packaging industry has become more concentrated in recent
years, as have the packaging industries of many other countries. In some sectors
(for example, glass packaging and tinplate) there is effectively only one
PACKAGING AND LABELLING
XVI
Australian producer. In some other sectors two producers dominate. The
limited size of the Australian market means that only a few firms are able to
achieve the scale and sophistication in packaging processes and products
necessary for technical efficiency.
The number of domestic producers can be an unreliable indicator of the level of
competition in an industry. Other important sources of competitive pressure
are:
• imports;
• the threat of entry (either domestically or from imports); and
• actual or threatened competition from substitutes.
The high sunk costs involved in investment in the production of most material
inputs to packaging, such as the manufacture and rolling of steel tinplate and
aluminium canstock, lead to relatively high domestic barriers to entry. Such
barriers are often lower in converting activities. In many cases, such as the
conversion of packaging papers into corrugated board, near duopolistic market
structures appear to be fairly competitive because of relatively low barriers to
entry.
Although users of packaging, particularly in the food and beverage sector, have
criticised the price and quality of Australian packaging over the years,
performance appears to have improved. More innovative products, greater
substitution possibilities and a change in industry culture towards collaborative
problem solving between firms have all made a difference.
B.1 Pricing of packaging and packaging inputs
The pricing of material inputs to packaging has a direct effect on the price of
converted packaging. Several participants have claimed that Australian
converters are unable to obtain some material inputs to packaging (for example,
steel tinplate and various polymers) at prices which are similar to those on major
overseas markets. Some material inputs to packaging are priced at or close to
the price (including duty) of imported substitutes; that is, the ‘import parity
price’.
Some Australian producers of material inputs to packaging — for example,
producers of aluminium and steel tinplate — are also substantial net exporters.
This suggests that they are efficient compared to overseas producers. When
exporting they receive the world market price less transport costs. This ‘export
parity price’ is below the import parity price by an amount equal to duty and
transport costs to and from Australia.
OVERVIEW
XVII
If Australia is a net importer of a material input — as, for instance, it is in the
case of most plastics — the economically efficient domestic price on the
domestic market for the input is likely to be import parity. (Whether any tariff
or dumping duties should be levied is a separate matter considered below.)
But where Australia enjoys a comparative advantage in the production of the
product and is, therefore, actually or potentially a net exporter, import parity
pricing to the domestic market is likely to impose unnecessary costs on the
economy. This is likely to constrain domestic sales of the product and domestic
value adding to that product downstream.
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