Editorial: Cost of living waits for no coalition deal

Editorial

EDITORIAL:

While the jostling coalition parties preach their sense of urgency that a Government be formed as swiftly as possible, there is a side note to that eventual deal which the average Kiwi should also be impatient about.

Christopher Luxon defined his election campaign around lowering the skyrocketing cost of living and an inflation rate hovering around 7 per cent for over a year.

“Hope and help are on the way,” the National Party leader declared in August when the party unveiled its much scrutinised $14.6 billion tax cut policy.

It targeted the “squeezed middle” and claimed a family with kids, on the average income of $120,000, would be up to $250 a fortnight better off. National also campaigned on a $249 million FamilyBoost policy aimed at giving families a 25 per cent rebate on childcare expenses.

“New Zealand should be a country where if you work hard, you can get ahead. But after years of economic mismanagement by Labour, topped off by two years of rampant inflation, huge increases in interest rates, and a shrinking economy, most Kiwis are going backwards,” the Prime Minister-elect said.

Christopher Luxon defined his election campaign around lowering the skyrocketing cost of living. Photo / NZME

A union analysis subsequently found just 3000 of New Zealand’s 1.63 million households would receive National’s full tax relief of $250 a fortnight.

But setting aside for the moment the new Government’s ability to implement such tax breaks to the precise extent, time is still of the essence for such aspirational economic relief policies to start being implemented.

This week, signs out of the corporate sector did not bode well for the average Kiwi as they approached the peak consumer period of any year - Christmas.

One-half of New Zealand’s supermarket duopoly, Foodstuffs, announced it will apply to the Commerce Commission to merge its North Island and South Island co-operatives into a single national business.

The consolidation proposal is expected to raise significant market competition questions and a strong response from grocery sector participants.

Foodstuffs North Island, Foodstuffs South Island and Woolworths NZ account for 80 to 90 per cent of the industry, which sells well in excess of $22b of groceries a year. After housing, food and staples are households’ single largest expense.

Foodstuffs North Island, Foodstuffs South Island and Woolworths NZ account for 80 to 90 per cent of the industry. Photo / Paul Taylor

A litmus test of the strain of grocery costs for working-class Kiwis might be found in the Auckland City Mission’s annual winter appeal, which saw demand for food assistance hit a new peak.

With a similar record demand for food parcels last Christmas reaching 10,000, it’s hard not to see the 2023 festive period shaping up as harder than ever for most Kiwis.

The uncompetitive duopoly of the New Zealand supermarket industry was made even more dour last week when online grocer Supie went into voluntary administration - owing creditors roughly $3m.

Adding extra salt in the wound for many struggling households would have been the news this week that BNZ registered an annual profit increase to $1.5b thanks to rising mortgage rates. A Commerce Commission study is looking into whether bank mortgage rate hikes are justified relative to deposit rate hikes.

The proposed merger of Foodstuffs’ North and South Island operations will also face a new dedicated regulator in the Commerce Commission’s grocery division of 25 staff, which could simply say no to the business plan.

A merged Foodstuffs would have consolidated and increased market power - meaning any new meaningful new supermarket competitor would face an even bigger challenge.

But independent of any Commerce Commission regulation, the election campaign’s blank-cheque policies need to start being cashed when it comes to easing Kiwis’ cost of living.

And you need a Government in place first to do so.