Finance Minister Nicola Willis speaks to media alongside Prime Minister Christopher Luxon during the post-Cabinet press conference in which the Government announced a tax rebate of up to $75 per week for early childhood education. Photo / Mark Mitchell
Finance Minister Nicola Willis speaks to media alongside Prime Minister Christopher Luxon during the post-Cabinet press conference in which the Government announced a tax rebate of up to $75 per week for early childhood education. Photo / Mark Mitchell
OPINION
New Zealand’s failed deregulation of the 1980s and 90s is driving up the cost of living, and only the Government can fix it. Instead, National are choosing to prioritise tax cuts rather than doing something about the fact New Zealanders are paying some of the highest prices for groceries in the world while supermarkets and banks make laughable super-profits in the New Zealand market - and Kiwi consumers are the butt of the joke.
Last week, the release of gross domestic product data for the most recent quarter showed the country had slipped into a recession. This should have been a week in which we were talking about the ongoing cost of living pressures households are experiencing. The National-led Government, elected on a promise to tackle the cost of living, should have been able to explain which of the bills they’ve sprinted through under urgency actually help people with rising costs, particularly families on low incomes.
Their only policy, announced yesterday, would give families less than the up to $130 they were going to get from this month under Labour’s policy to extend 20 hours of free early childhood education (ECE) to 2-year-olds. At the same time, they’re narrowing people’s access to disability funding and school lunches for kids – which save families an average of $33 per week per child.
National's only policy, announced yesterday, would give families less than the up to $130 they were going to get from this month under Labour’s policy to extend 20 hours of free ECE to 2-year-olds. Photo / 123RF
It was also the week when Parliament debated Te Pāti Māori’s members’ bill to take GST off all food. This was a welcome opportunity to talk about what the most effective solutions were to ensure the tax system – and the broader system of social services it supports – is working for everyone.
The issue of GST being applied to basic necessities was widely debated during the last election. Nicola Willis, National’s finance spokesperson at the time, repeatedly claimed the benefits of a GST reduction would not be passed on to households because “the most powerful duopoly in the country”, referring to Foodstuffs and Woolworths, would simply pocket the savings. These criticisms were repeated last week in the House, with Revenue Minister Simon Watts arguing “one of the biggest beneficiaries of this policy that the member is proposing will actually be the supermarkets chains themselves, not the low-income families”.
That is a valid concern, but the ability of the supermarkets to fleece Kiwi consumers is not limited to potential tax changes. The supermarket duopoly face weak competition and enjoy enviable market conditions in New Zealand. There is good reason to think if the opportunity arose to increase their profits at the expense of consumers, they would take it.
The issue of GST on basic necessities was widely debated during the last election. Photo / Sylvie Whinray
But are those ministers saying we must simply accept this exercise of corporate power as a fact of life? Are they telling us it is inevitable that supermarkets make super-profits from bread, milk, meat and vegetables sold to Kiwis, and that those supermarkets will continue to be many times more profitable than their international counterparts because of New Zealand’s weak regulatory environment?
On the campaign trail, Willis had a bit more ambition. She said she wanted to see a third entrant into the supermarket sector, something Labour was actively working on alongside the establishment of the new Grocery Commissioner to keep prices in supermarkets fair.
But far from pushing out on Willis’ idea, last week the Commerce Commission dealt a blow to the only currently viable third supermarket competitor, The Warehouse. It decided against investigating Sanitarium’s decision to cease supply of Weetbix to The Warehouse late last year. The Warehouse had been selling Weetbix at a considerably lower price than supermarkets. Sanitarium quickly backtracked after The Warehouse claimed publicly that the move reinforced the position of the supermarket duopoly.
The Warehouse had been selling Weetbix at a considerably lower price than supermarkets.
The Commerce Commission’s decision was called “astonishing” by the Grocery Action Group. The commission is yet to publicly explain its reasoning, but its actions do little to instil confidence that in a small economy such as ours, the regulator will be proactive in assisting new entrants (and consumers) in areas where there is an obvious issue of market competition.
Last week also saw the release of the Commerce Commission’s draft report market study into personal banking services. This market study was initiated by the Labour government in June 2023. It found our banking sector is dominated by the major banks, which are highly profitable by international standards. There is little sustained market competition, relatively stable market shares for ANZ, Westpac, ASB and BNZ, and a focus on price-matching rather than ongoing competition for customers. It also highlighted the problems that have arisen since the 2003 merger of ANZ and the National Bank was allowed to proceed, consolidating a market share of around 30 per cent in one bank.
The four major banks.
That lack of competition is costing Kiwis homeowners thousands of dollars every year. According to interest.co.nz, the average price paid by a first-home buyer peaked in April 2022 at $718,000. The issues with housing affordability in New Zealand are well-documented, but even for those who have managed to get into the property market, the lack of competition in mortgage rates is an ongoing burden.
Minister of Commerce and Consumer Affairs Andrew Bayly should this week require the Aussie banks to justify the excess profits the Commerce Commission has highlighted. Next, he should introduce Labour’s Consumer Data Rights Bill, which would give people more control over their data and support data sharing with customers’ consent in a way that will support new products and services and allow for easier comparison of prices. It’s ready to go and would help consumers get the best deal from the banks. He should also champion Labour’s Food Pricing Inquiry to get into the details of grocery pricing in New Zealand, which I announced in Parliament, and I will be seeking support from National MPs via select committee to have that done in a cross-partisan way.
National promised to get the cost of living under control. If they choose not to prioritise the work that needs to be done to get prices down for ordinary Kiwis and instead continue with their reckless tax cuts for landlords, then it will be New Zealanders who continue to foot the bill.
