In the red corner
Ihave seen mixed views on the Commerce Commission’s study into the grocery sector. Some believe an opportunity has been missed, others feel that the commission’s initial draft report had more teeth, and there are some who think the commission landed in about the right place.
My view, however, is clear: New Zealanders deserve a fair deal at the supermarket, and we should not stop pulling levers until this is a reality. This is too important to not get right on behalf of Kiwis.
There is a serious case for change when it comes to competition in the sector. Our supermarkets are making more than double what the Commerce Commission considers to be a normal rate of return on capital for grocery retailing. And New Zealanders are paying more at the checkout than most – out of 38 OECD countries we’re the fifth highest in terms of grocery prices.
With the global energy shock caused by the war in Ukraine and the inflation spike caused by COVID-19, it’s extremely tough right now for families in the middle and on low incomes. That’s why the Government is acting immediately to address the Commission’s recommendations and to ensure that fairer prices are delivered.
The commission has found the freeing up sites for supermarkets is important for facilitating direct competition with the existing major supermarkets and that currently, restrictive covenants over land are a major barrier to supermarkets accessing new sites. We want to ban this practice and see further competition.
To address imbalances in bargaining power between the major grocery retailers and many of their suppliers, we are exploring how a Code of Conduct could be developed. And, to provide ongoing oversight of the sector, we are looking at the role a dedicated regulator for the grocery sector could play.
Given the importance of achieving healthy levels of competition in our grocery sector, the Government has not ruled out some of the other options that Commerce Commission tabled while developing its report. If we are not satisfied that Kiwis are getting a better, fairer deal from the changes recommended in the report, we will look at different levers to pull.
Since 2017, we have worked to lift incomes and tackle the cost of living, including introducing the Families Package, raising the minimum wage and cutting fuel excise. There is no silver bullet, but we will keep taking steps to help families get through.