Tonight, the Government will immediately introduce a law change to stop supermarkets land-banking, in a largely symbolic show of its commitment to reining in rising inflation
The Government has revealed its answer to the cost of living crisis, and it is to throw money at households, rather than freeing businesses to bring down prices.
In this afternoon’s Budget, Finance Minister Grant Robertson announces he’ll give more than a billion dollars back to taxpayers. That’s composed of a $235m extension to fuel excise and road user charge cuts, and $814m in temporary cost of living payments.
The $27/week payments are available to those earning up to $70,000 who are not eligible to receive the existing winter energy payment. Because nearly a third of low-income adults are already entitled to the energy payment, it’s middle-income earners who are getting some new help with their soaring shopping bills.
Robertson acknowledges that the payments, rather than reining in inflation, will worsen it. But he hopes that contribution to inflation won't be "excessive", and that's why it will run only for three months through winter – when prices rises are expected to bite deepest.
The payments aren't intended to ease inflation; they're intended to help households cope with it. What they will do is help shift the pain away from those on lower and middle incomes. Up until now, it is they who have suffered the most from rising grocery bills, pump prices, rents and mortgage interests rates.
The Budget doesn't offer any structural changes to free up businesses to manage prices. Instead, the transfers will in effect move the worst of the impact to those on higher incomes – and to businesses.
For instance, there is little to quickly restore international and domestic supply chains.
And despite hints of more to come, tonight's first reading of urgent legislation targeting supermarkets will have no immediate impact on food prices whatsoever.
Prime Minister Jacinda Ardern told Parliament that the urgent law change would begin the process of addressing the root causes of high prices in New Zealand's grocery sector. "We have a lack of competition in this country, and it is impacting food prices and it’s impacting families," she said.
"While there is much to do here, following the Commerce Commission report we are starting today with unravelling some of the tactics to block competitors. But I can assure you, this is just the start."
But the two big supermarket chains, Foodstuffs and Countdown, have already read the writing on the wall and committed to removing all property and lease covenants that they had used to keep out competition.
Robertson says the Government is also looking at a code of conduct between retailers and suppliers, and a dedicated grocery sector regulator – but the supermarket chains have already agreed to those as well.
Commerce Minister David Clark has said he will consider going further than the Commerce Commission recommended in its grocery competition inquiry, and is to formally respond to the commission's report later this month.
He has suggested the Government could yet require the supermarket chains to divest some of their stores – but for shoppers, that remains an expensive pie in the sky.
Meanwhile, there are no structural or regulatory changes announced today that will bring down food prices.
This afternoon, the Reserve Bank will publish its Household Expectations Survey, with new data on how fast New Zealanders expect wages and housing costs to rise.
That should provide the Government with a clear indication of just how worried families are about what all politicians now agree is a cost of living crisis.
