During the hearing, McKim said Banducci was unwilling to confirm this figure because he didn’t “like the story that it’s telling” because the figure was “more than 2½ times the return on equity made by Australian banks, which are the most profitable banking corporations in the world”.

The average return on equity of Australia’s big four banks across the past five years is 9.9 per cent.

McKim later posed the same question to Coles chief executive Leah Weckert, who said her company’s return on equity was 31 per cent for 2023.

However, she argued this metric was not typically used in the grocery sector and said the figure appeared higher because the Australian supermarket leases, not owns, 99 per cent of its stores, unlike UK-based supermarkets such as Tesco or Sainsbury’s, which own about 30 per cent of their stores.

“They would hold equity against those buildings and those pieces of land on the balance sheet. As we don’t own those assets, we don’t hold equity on the balance sheet … therefore the denominator we’re dividing by here is lower and so you end up with a higher [return on equity],” Weckert said.

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Both ASX-listed supermarkets finished the trading day about 1.2 per cent lower.

Dr Craig Emerson, who is helming the review into the food and grocery code of conduct, also fronted the hearing on Tuesday afternoon and was asked about his position on stronger divestiture powers for the competition watchdog, which could mean the supermarkets are forced to sell stores if they became too big.

Emerson, a former minister for small business in the Labor government, expressed in the review’s interim report that he did not believe divestiture would necessarily lead to more competition and could inadvertently lead to the opposite result.

Former ACCC chair Allan Fels fronted the inquiry yesterday and disagreed with this assessment, asking whether Emerson “did any study of [divestiture] whatsoever”.

“He’s just picked up line one of the standard big retailer response, without really going into it,” Fels said.

Emerson said Fels was entitled to his view but was wrong in saying he had parroted lines from the major supermarkets. “If I’d be doing that, I’d be recommending a voluntary code weaker than water. I’m not doing that.”

When asked whether Bunnings should be included in the food and grocery code of conduct – a notion the hardware giant has rejected – Emerson said he was continuing engagement with Bunnings and Greenlife Industry Australia.

“Whatever we would do, I would hope that Bunnings fully complied with the letter and spirit of the code, whether they’re covered by it or not,” he said.

On whether the code would reduce prices for consumers, Emerson said many suppliers were earning just enough to keep operating but not enough to invest in new technologies to provide better products, potentially lower prices or make healthy profits.

“I think it’s an unsatisfactory situation where many are on such tight margins that they’re not necessarily closing tomorrow,” said Emerson. “That’s why adherence to this mandatory code of conduct is not only in the interest of the suppliers, it’s in the interest of consumers.”

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