In a speech delivered to honour Melbourne University economist John Freebairn on Thursday night, Dr Leigh shared the fascinating results of a comb through IBIS World data on the revenue share of firms in 400 industries. Illustration: Simon Letch The biggest four firms control more than four-fifths of the market in department stores, newspapers, banking, health insurance, supermarkets, domestic airlines, internet service providers, baby food, and beer and soft drinks. The biggest four firms control more than two-thirds of the markets for petrol retailing, telecommunications, credit unions, cinemas, liquor retailing, bottled water and fruit juice. And more than half of the markets for pharmaceuticals, hardware, gums, snack foods, magazines, newsagents and international airlines are controlled by the biggest four firms in those markets.

"Like a large tree that overshadows the saplings around it, firms that abuse their market power prevent newer competitors from growing. They hurt entrepreneurs and often reduce the scope for innovation. Consumers suffer through higher prices, lower quality and less choice," says Dr Leigh. The Aldi threat has forced supermarkets to cut their prices. Credit:Quinn Rooney Welcome to Australia Inc, folks. It's cosy. Compared with the US – where the top four firms control, on average, 33 per cent of that country's markets – market power of top firms in Australia is more concentrated at 41 per cent. Labor's competition spokesman Andrew Leigh said for too long market concentration and inequality had been thought of as separate issues. Credit:Elesa Lee

Australia is particularly mogulised when it comes to liquor retailing (78 per cent of market controlled by the top four firms, compared with 10 per cent of the market in the US), supermarkets (Australia 91 per cent, US 31 per cent), petrol (Australia 70 per cent, US 14 per cent) and cardboard manufacturing (Australia 88 per cent, US 36 per cent). "The combined revenue of the 10 largest Australian firms – ANZ, CBA, NAB, Westpac, Wesfarmers, Woolworths, AMP, Australian Super, Rio Tinto and BHP – is the equivalent of one-fifth of the total Australian economy," says Leigh. But surely things are getting better, as the cool winds of capitalism stir change and the emergence of new, more-efficient business models to challenge the dominance of the old? Ha. No, market concentration in Australia is getting worse, according to Leigh. The number of firms in Australia actually shrank 1 per cent from 2011-12 to 2014-15, driven not because more businesses collapsed, but due to a slowing in new business formation.

In the retail sector, the number of firms shrank 8 per cent, even as the value of goods and services produced in the industry grew 13 per cent. Despite the entry of Aldi and Costco, the market share of Coles and Woolworths has risen from 60 per cent to 73 per cent since 2008 when Kevin Rudd held his grocery price inquiry. Observers have long pointed to Australia's relatively small population and distance from larger markets to explain our corporate behemoths and the lack of competition they face. However, according to Leigh: "This does not explain why markets should have become more concentrated. Since the turn of the century, Australian population growth has been among the fastest in the advanced world, and incomes per person have also risen (though not in recent years). If all that mattered was market size, there should be less concentration in Australia, not more." According to Leigh, the shift to new technologies and the "weightless" economy were supposed to drive down barriers to entry and switching costs.

However, "in many sectors, this now looks to be a forlorn hope", he says. Think Google, Apple and Facebook. It remains truer today than ever that to succeed in business in Australia, it matters not so much what you know, as who. An outsized finance sector has grown up that makes a living charging fees for advising on mergers and takeovers that only further concentrate market power. The former merchant banker and managing director in Australia of Goldman Sachs, Malcolm Turnbull, should know this only too well. According to the Institute for Mergers, Acquisitions and Alliances, the number of mergers in Australia has risen from 394 in 1992 (with a combined value of $US12 billion) to 1460 last year (with a value of $US117 billion). The concentration of market power among a smaller number of firms is only adding to forces driving greater inequality, says Leigh.

Labor has rejected the Coalition's so-called "effects test", which would override existing "misuse of market power" provisions and open firms to legal challenge over any activity that had the "effect, or likely effect" of reducing competition. Turnbull angered big business when he adopted this policy this year in a sop to the National Party, which thinks the new clause would provide greater protection for suppliers to the supermarket giants. In reality, however, it would apply to competitors of only the retailers, not suppliers, who are instead covered by existing "unconscionable conduct" protections. All the new test would probably do is expose all companies to costly litigation for doing what every business does: try to win a greater share of a market. There are no easy solutions to diluting the growing market power of Australia's big corporates. Labor's proposals include higher penalties for and greater scrutiny of companies who target disadvantaged Australians. But if we're serious about sowing the seeds of a more entrepreneurial and innovative nation, we need to start by acknowledging how removed that is from our present reality.

Oh, and if you want to win the guessing game; the most dispersedly controlled markets in Australia are for car dealers, hairdressers, dentists and law firms, the top four in those industries accounting for less than 10 per cent of the market.