The proposed changes, although positive, are not transformative, economists say
Recommended changes to how the New Zealand’s supermarket sector operates – although positive – will not likely generate sufficient competition to deliver significant benefits for the consumer, according to Westpac economists.
In Westpac’s latest NZ Economics report, Paul Clark, industry economist, said the current cost-of-living crisis and growing concern over food prices have brought last year’s Commerce Commission’s grocery sector recommendations back into focus.
The government and the supermarket industry are well progressed on implementing the proposed changes, particularly two key pieces of legislation: the Grocery Competition Bill and Commerce (Grocery Sector Covenants) Amendment Act.
But Westpac believes that stronger measures will be required to generate enough competition to deliver the outcomes that the government seeks.
“We think that stronger measures would be needed to achieve these outcomes, including breaking up the existing duopoly that currently dominates the sector,” Clark said.
“This would involve some tough policy trade-offs, including potentially higher prices in the short term as economies of scale were lost. Longer-term, however, we would expect the benefits of a more level competitive playing field to be reflected in better prices, a wider range of goods, and an improved customer experience.”
“We also think any reforms that improve competition would be helpful in improving the responsiveness of grocery prices to changes in consumer demand and aid the transmission of the Reserve Bank’s monetary policy to the benefit of the entire economy.”
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