Token supermarket policies show desperate, visionless election campaigns

“Today’s release of Green-Party style policies from parties to break up supermarkets and ‘ban price-gouging’ shows desperate and visionless campaigning driven more by focus group than economic policy,” says ACT Leader David Seymour.

“ACT agrees New Zealand needs more grocery competition so families can see lower prices, but we need to be confident the solution will leave those families better off. Policies should be judged by outcomes, not intentions.

“The policies produced today are little different from the Greens’ roundly-mocked Government-owned supermarket. In a world trying to boost productivity, these policies will actually prevent New Zealanders benefiting from investment and growth.

“We’ve seen the impact of heavy-handed intervention with the oil and gas exploration ban. When the Government signals that successful businesses can simply be broken apart, potential new entrants are less likely to invest here.

“Ironically, draconian regulations can make supermarket competition worse. We won’t get Aldi, or Coles, or Walmart to come to New Zealand if they believe it’s politically fashionable to attack their investments after a few bad polls. Already, the previous Government had to exempt Costco from supplier obligations or they wouldn’t come.

“The analysis behind this latest proposal is weak and the results are not even that promising. It amounts to $2.38 a week per person. For context, food price inflation in the year to July was 1.9 per cent. 1.9 per cent of $125 is $2.38, so someone with a $125 grocery bill would see all of these gains eroded in the first year by food price inflation alone.

“And that’s the hopeful scenario. The figure is couched in so many variables it probably won’t happen and could end up costing Kiwis instead.

The report itself says:

‘We do not discount the probability that there might well be very high, or even insurmountable, legal and implementation hurdles to achieving the potential gains set out in our report. But they are outside scope for this piece of research…

The report goes on to say the forced restructuring could make groceries more expensive.

‘Our Foodstuffs finding is sensitive to assumptions regarding changes to costs. The gains from restructuring shrink significantly, and could be negative, if restructuring leads to higher supply chain costs in the long run than we have assumed.’

The caveats carry on, suggesting the report’s authors really want nothing to do with this idea.

'We have not tested our estimates or assumptions with the industry nor have we been able to seek additional information that would help us to improve our estimates.'

'…foodstuffs stores are all owner-operated as part of a cooperative, rather than being owned and controlled by a central entity. Coordinating amongst hundreds of different owners who may not see its merits may prove to be challenging.'

'…we recommend further work be done on the practical feasibility and cost implications of restructuring options considering what would be a significant regulatory action with non-trivial legal, reputational and implementation risks.'

“It appears the National Party do not want to tie themselves too closely to the policy, either. They are not actually proposing to break up supermarkets, they’re asking the Commerce Commission to look at it. This simply drags out uncertainty for years.

“There is also an obvious question about breaking up Foodstuffs alone. Foodstuffs is made up of locally owned co-operatives, while Woolworths New Zealand remains part of a much larger Australian group. Cutting one competitor down in scale while leaving the other intact could simply shift the balance of market power.

“It is not obvious how that delivers better prices for Kiwi shoppers, but it would be a blow to the Kiwi families who have often worked in the industry for decades to save up and buy their local Pak n Save or Four Square.

“Meanwhile the Labour Party’s so-called policy that they will stop excessive prices is naïve in the extreme. How much should a lettuce in Timaru cost at different times of the year, and will the allowable price change for a good or bad growing season, how about changes in export prices? There is no serious way of knowing, and that’s just one of 20,000 products on the shelves of the average supermarket. It is a completely unserious policy.

“ACT’s preference is to cut the red tape that stops new competition emerging. That means making it easier for new entrants to build supermarkets, invest in distribution, secure sites and bring new capital into New Zealand.

“If you’ve ever wondered why grocery prices are high, look at the story of Halswell Woolworths. It doesn’t exist yet, because it took four years and $3 million just to get permission to build it.

“ACT has proposed a fast-track regime for supermarkets. A new entrant or smaller grocer could get approval for a full rollout of stores and warehouses within months, not years.

“We have a serious cost of living challenge to tackle, and we won’t address it with Labour/Green-lite finger-pointing and cutting down of tall poppies. That just scares away the very things we need to unlock New Zealand’s potential, like investment, innovation and competition.”