None of these interventions rests on a finding that anyone has broken the law. No court judgment, no Commerce Commission determination, nothing.
That matters. Businesses invest when they can rely on owning what they build. Firms sign contracts when they can rely on the terms being honoured. Disregard either and the effect on the economy is chilling.
Of course, there is real economic pain behind the grocery proposals. Pandemic disruption and war pushed food prices up. Successive governments have more than doubled public debt since Covid, adding inflation of their own making. Wages have not kept pace. No party could ignore that and expect to be elected.
The Greens would take 120 supermarkets into public ownership for $2.8 billion and let councils lease out shops left empty for a year without owners’ consent. Labour would outlaw “excessive” food prices and separate supermarkets’ distribution arms from their retail businesses.
In April, New Zealand First proposed that Foodstuffs be cut in half. On 16 September, National agreed – if it wins the election and the Commerce Commission approves.
National leads this government and expects to lead the next. When Finance Minister Nicola Willis first floated a break-up in March last year, I wrote in this column that it risked every large business concluding that its ownership structure is vulnerable to political whim. Eighteen months on, it is National’s policy for the next term.
Auckland grocers formed Foodstuffs in 1922 to buy together while remaining independent owners. Its North and South Island co-operatives still belong to the grocers running 500-odd PAK’nSAVE, New World and Four Square stores. Those grocers own the distribution centres and trucks too. A century of buying together is why a PAK’nSAVE prices as cheaply as it does.
National points out that, under its proposal, no owner will be forced to sell. But keeping your store is not the same as keeping the arrangements that its prices depend on.
The Government’s own analysis does not measure whether New World and PAK’nSAVE hold each other’s prices up. It assumes they do. All the promised gain rests on that assumption.
One distribution centre picks for New World, PAK’nSAVE and Four Square, with one truck run dropping at any of the three. Split them and somebody must build the second network.
The analysis assumes that will add one percent to the cost of goods sold. At two percent most of the promised gain vanishes.
And a company that may be ordered to split itself in two has reason to put off its next investment, not to mention every other firm now wondering whether it is next.
Liam Hehir argued here on Tuesday that breaking up big business is a respectable conservative tradition – especially in America. But courts broke up Standard Oil and AT&T after the United States sued them for violating antitrust laws. Neither involved Parliament dividing a lawful business by statute.
The New Zealand Initiative has long argued that politicians think about competition the wrong way. What holds prices down is not how many competitors a market has but how easily another could open.
My colleague Eric Crampton told a select committee in 2023 that planning laws made large-scale supermarket entry in New Zealand so close to impossible that it might as well have been explicitly forbidden.
Would-be entrants, asked by the Finance Minister what stood in their way, named zoning rules and slow consents. Ten district plans contain fourteen provisions that cap the number of supermarkets an area may have. Parliament fast-tracked new supermarket sites last December but left the district plans untouched. The Government’s own Grocery Commissioner says the reforms need time to bed in.
Before taking an axe to a private business, Parliament should make it possible to open a supermarket and see who comes.
Just days after its supermarket bombshell, National turned its sights on another Kiwi institution – retirement village operators like Ryman, Oceania and Summerset.
Typically, retirement village residents do not buy their units. They buy a right to live in one and get their money back, less fees, when the next resident takes over.
National would make operators repay a departing resident within nine months, whether anyone has taken the unit or not. Labour would make it three. But requiring repayment sooner does not make the money to pay it available any sooner. It just means operators will have to hold more capital – and capital comes at a cost.
Officials estimate that a three-month deadline could require up to $4.1 billion of extra capital and add up to $118,000 to the price of a retirement village unit. Nine months will cost less, but the cost will turn up nevertheless, either in what a new resident pays, or in how many retirement villages get built. There is, as they say, no such thing as a free lunch – even in retirement villages.
There are times when a government has good reason to override arrangements people have lawfully made or restrict those they would make. But it must show that the benefits justify the costs. The official estimates put substantial costs against uncertain benefits. That is a weak foundation for interfering in other people’s business.
The grocers who met in Auckland in 1922 built a co-operative they expected to keep. Parliament may now divide it. The woman moving into a retirement village next year will pay more than she would have, on terms she did not choose.
Parliament can nationalise a supermarket chain, force divestment or regulate prices. But it cannot order investors to build the next supermarket or retirement village.
Nobody builds what they cannot keep.
Roger Partridge is chairman and a co-founder of The New Zealand Initiative and is a senior member of its research team. He led law firm Bell Gully as executive chairman from 2007 to 2014. This article was sourced HERE
The Greens would take 120 supermarkets into public ownership for $2.8 billion and let councils lease out shops left empty for a year without owners’ consent. Labour would outlaw “excessive” food prices and separate supermarkets’ distribution arms from their retail businesses.
In April, New Zealand First proposed that Foodstuffs be cut in half. On 16 September, National agreed – if it wins the election and the Commerce Commission approves.
National leads this government and expects to lead the next. When Finance Minister Nicola Willis first floated a break-up in March last year, I wrote in this column that it risked every large business concluding that its ownership structure is vulnerable to political whim. Eighteen months on, it is National’s policy for the next term.
Auckland grocers formed Foodstuffs in 1922 to buy together while remaining independent owners. Its North and South Island co-operatives still belong to the grocers running 500-odd PAK’nSAVE, New World and Four Square stores. Those grocers own the distribution centres and trucks too. A century of buying together is why a PAK’nSAVE prices as cheaply as it does.
National points out that, under its proposal, no owner will be forced to sell. But keeping your store is not the same as keeping the arrangements that its prices depend on.
The Government’s own analysis does not measure whether New World and PAK’nSAVE hold each other’s prices up. It assumes they do. All the promised gain rests on that assumption.
One distribution centre picks for New World, PAK’nSAVE and Four Square, with one truck run dropping at any of the three. Split them and somebody must build the second network.
The analysis assumes that will add one percent to the cost of goods sold. At two percent most of the promised gain vanishes.
And a company that may be ordered to split itself in two has reason to put off its next investment, not to mention every other firm now wondering whether it is next.
Liam Hehir argued here on Tuesday that breaking up big business is a respectable conservative tradition – especially in America. But courts broke up Standard Oil and AT&T after the United States sued them for violating antitrust laws. Neither involved Parliament dividing a lawful business by statute.
The New Zealand Initiative has long argued that politicians think about competition the wrong way. What holds prices down is not how many competitors a market has but how easily another could open.
My colleague Eric Crampton told a select committee in 2023 that planning laws made large-scale supermarket entry in New Zealand so close to impossible that it might as well have been explicitly forbidden.
Would-be entrants, asked by the Finance Minister what stood in their way, named zoning rules and slow consents. Ten district plans contain fourteen provisions that cap the number of supermarkets an area may have. Parliament fast-tracked new supermarket sites last December but left the district plans untouched. The Government’s own Grocery Commissioner says the reforms need time to bed in.
Before taking an axe to a private business, Parliament should make it possible to open a supermarket and see who comes.
Just days after its supermarket bombshell, National turned its sights on another Kiwi institution – retirement village operators like Ryman, Oceania and Summerset.
Typically, retirement village residents do not buy their units. They buy a right to live in one and get their money back, less fees, when the next resident takes over.
National would make operators repay a departing resident within nine months, whether anyone has taken the unit or not. Labour would make it three. But requiring repayment sooner does not make the money to pay it available any sooner. It just means operators will have to hold more capital – and capital comes at a cost.
Officials estimate that a three-month deadline could require up to $4.1 billion of extra capital and add up to $118,000 to the price of a retirement village unit. Nine months will cost less, but the cost will turn up nevertheless, either in what a new resident pays, or in how many retirement villages get built. There is, as they say, no such thing as a free lunch – even in retirement villages.
There are times when a government has good reason to override arrangements people have lawfully made or restrict those they would make. But it must show that the benefits justify the costs. The official estimates put substantial costs against uncertain benefits. That is a weak foundation for interfering in other people’s business.
The grocers who met in Auckland in 1922 built a co-operative they expected to keep. Parliament may now divide it. The woman moving into a retirement village next year will pay more than she would have, on terms she did not choose.
Parliament can nationalise a supermarket chain, force divestment or regulate prices. But it cannot order investors to build the next supermarket or retirement village.
Nobody builds what they cannot keep.
Roger Partridge is chairman and a co-founder of The New Zealand Initiative and is a senior member of its research team. He led law firm Bell Gully as executive chairman from 2007 to 2014. This article was sourced HERE
5 comments:
It's all about barriers to entry.
The building restrictions are very real but we sit on the cusp of a technology shift that the supermarkets will struggle to control and that is online purchasing and delivery.
What proportion of our weekly shop could even be suppled from Australia or Singapore or even further.
A weekly supply agreement from a distant supplier if it was cheaper could change everything, and that is something a Govt. could look at to ensure there are no glitches from a regulatory perspective.
Isn't it strange that when the government intervened in private property right matters to pass retrospective law wiping out the Smith versus Fonterra case in Fonterra's favour that the NZ Initiative was silent? And it was also silent when ANZ was lobbying to get retrospective law introduced to wipe out a class action suit by its customers. Seems when property rights are infinged for the little guy, the Initiative says nothing. But when big duopoly business is threatened, it says government should butt out of private matters. ANZ Bank and Fonterra, by the way, are paid up Initiative members. The public has had enough of NZ being run by a Business Class Club that want everyone else to go sit in the back of economy. That group is causing NZers to vote left, wrecking it for us pro competitive market types who dont want the country to lurch left.
Harry Mowbray, the father of Zuru billionaire siblings Luke and Anna, wants to fund a campaign for ACT, NZ First and National voters to split their electorate and party votes strategically in order to add an extra 10 to 30 ‘overhang’ seats in favour of the governing coalition in the November 7 election, The Post-reported this morning.
Democracy and billionaires, these things don’t go well together, do they?
In a way the Maori seats have always been a structural overhand, and Winston was quoted as saying that an ethnically base party, which was the consequence of that Maori seats, was the worst type of party. I agree.
Regarding the overhang strategy, I think the splitting of votes has always been an element of MMP and people may do a bit in the National camp but a big proportion of the Labour National voters are "baked in" as such the proportion of voters able and willing to exercise this strategy are limited.
The feature that may come about this election that I like is that National would have no "list" and that would freshen the place a lot.
Nationals entitled list will be altered a lot and this Ludacris narrative that they are running will be over.
NZ just needs to embrace competition and any barriers needs to be disassembled.
Many years ago when I did macro economics the lecturer was asked what we should do with monopolies and the answer was very straight "all monopolies are a result of government regulation".
That was 50 years ago and still we look for villains in the wrong place.
Robert, I agree. The NZ Initiative is very vocal when rules and decisions are something they dislike. Very quiet when it is to their advantage. It is almost as if they pretend to be neutral.
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