Heather du Plessis-Allan: We are being irrational about the price of butter

The price of butter, though high, is not the main pressure on household budgets. Photo / NZME

THE FACTS

• Stats NZ data shows the price of an average 500g block of butter rose 46.5% to $8.60 in the year ended May.
• New Zealanders pay less for butter than Australians when adjusting for currency and taxes.
• Fonterra says the co-operative won’t have different butter prices for local and overseas customers.

We are being irrational about the price of butter.

Yes, $8.60 a block is pricey.

But really, how many blocks of butter is your family eating each week?

Unless you’re into commercial scale baking, butter is not the thing putting the most pressure on household budgets.

Try power. This winter power is costing the average household almost a block of butter every day. Or rates. That’s costing the average Wellingtonian more than a block of butter every day.

Those expenses have no alternatives. You have to pay them.

With butter we at least have alternatives. If we don’t like the price we can do a swap. I don’t want to be Marie Antoinette but at least we have the option to switch to margarine.

Not only have we abandoned logic, but also facts. Even the Finance Minister briefly took to complaining that butter is cheaper in Australia than in the very country that produces it.

Except that’s not true.

At the time of writing, if you take Woolworths’ salted butter, which is available both sides of the Tasman, adjust for currency and the fact the Australian Government does not charge their equivalent of GST on butter, we actually pay 30c less.

Discounting butter domestically is impractical, as it would require subsidies, impacting farmers and shareholders.

Actually, the price of butter is a good news story for New Zealand. Because if we’re paying our farmers more, the world is paying our farmers more. And they’re buying a lot more blocks of butter than we are. So that means they’re paying a good chunk towards our tax take, our health, our roads, our schools.

It’s become slightly fashionable to suggest the solution is to discount butter domestically. That’s a nutty idea.

A discount is a subsidy. A subsidy has to be paid by someone. Who?

Fonterra? The shareholders will probably object to that. Maybe, if this drama runs on long enough and there is enough reputational damage to Fonterra, it might be in the business’ interest to cut the price to make the pain stop. That would not be a good day for farmers and shareholders.

Miles Hurrell attributes the 46.5% rise in butter prices to global demand and supply issues. Photo / Alyse Wright

The Government? Again, bonkers. If New Zealand is too broke to afford the full Dunedin hospital build, we’re too broke to help commercial bakers afford their butter.

The truth is there is no fix to the price of butter that isn’t stupid or temporary. We simply have to pay the price that we pay.

And the Finance Minister knows this. She knows this because she is a very clever woman. And because she worked for Fonterra for six years.

Finance Minister Nicola Willis has turned butter into the cost-of-living symbol. Photo / Mark Mitchell

So, she should never have turned butter into the cost-of-living symbol she has. This really started with her in April when she visited Costco and was taken by the fact it could sell butter for about half the price mainstream supermarkets were selling it for.

It became her evidence that supermarkets were ripping us off. But then somehow, Fonterra got dragged into it and one of their regular ministerial briefings became a please-explain. And then the TV news was chasing the CEO Miles Hurrell around the forecourt of Parliament and going live to air while the meeting was under way. And there were expectations.

And then nothing happened.

And it has become yet another example of the Finance Minister, disappointingly, talking big but doing nothing. Just like with the retail banks. And just like with the supermarkets, so far.

Spare a thought for Hurrell. The man is one of the most impressive Kiwi CEOs of his generation but had to spend his week cast as the villain of the butter story.

There is no story. It’s not even the biggest pressure on our weekly bills.