Back then, the commission identified two main factors making it difficult for competing products to be introduced and expand: a building regulatory system that continued to incentivise designers, builders and building consent authorities to favour familiar building products over new or competing products; and quantity-forcing rebates paid by established suppliers to merchants that appeared, under certain conditions, to be reinforcing regulatory factors impacting entry and expansion, making it difficult for new or competing products to access distribution channels and increase sales.
Yesterday, the Minister for Building and Construction and Minister of Commerce and Consumer Affairs, Dr Duncan Webb, announced that the Government agreed, or agreed in principle, to eight of the nine recommendations from the commission to improve the sector for businesses and consumers.
Additionally, the Government announced it would go further than some of the commission’s recommendations and expand on its existing review of the building consent system. It will also widen its work to ensure alternative building products are more easily used, following last year’s plasterboard shortage.
The one commission recommendation the Government did not agree with to was to promote compliance with the Commerce Act, including by discouraging the use of quantity-forcing supplier-to-merchant rebates that may harm competition.
The Government says the recommendation is “noted” as the Commerce Act was recently reformed to strengthen the commission’s ability to take effective enforcement action for misuse of market power, and therefore no specific further actions by Government were required.
That the Government is prepared to go further than Commerce Commission recommendations in almost every case, except where action has already taken place, strongly suggests the commission read the room wrong on what was needed.
This time last year, production of the widely-used interior cladding, gib plasterboard, had been corralled by a near-complete monopoly on the market, but couldn’t keep up with demand. This shortage created a “black market” online, with reports of a single sheet listed for five times its normal cost, stockpiling, and “opportunists” cashing in.
As measures to respond to New Zealand’s housing crisis shortage kicked in, desperate builders and renovators were being green-lit to do the work but couldn’t get the materials.
The average building cost per square metre in New Zealand is already extravagant, at about $2500 per square metre.
The Productivity Commission has previously found New Zealand was paying 20 to 30 per cent more than Australia for building supplies, and 28 per cent product price rises were occurring during the supply shortages.
The industry was blessed with a deregulated market but took too much advantage. The Commerce Commission should have responded much stronger, and sooner.
