Poor Regulation Is Burning This Government Down

Written By: - Date published: 10:41 am, April 28th, 2023 - 37 comments
Categories: Deep stuff, Economy, energy, labour, Politics - Tags:

This government has within its power the ability to alter the crippling cost of living increases we now face. If they don’t do the political job they can do with prices, they will lose power at the election.

New Zealand has one of the most concentrated economies in the world.

Being one of the most concentrated economies in the world also requires really fearless government.

Since 2017 New Zealand food prices have gone up 27%: fruit up 36%, vegetables up 51%, cheese up 50%, eggs up 100%. No government will survive for long with a cauliflower at $8 each or one egg for close to $1 each.

In energy the news is just as bad. From November Genesis and Contact Energy customers will see gas prices go up 11%. Last year alone power prices jumped up to $1,000 a year.

In transport energy the fuel subsidy will come off in June, and that is a world of pain for which there is little viable alternative even in Auckland. Some such as beneficiaries and retired people are shielded from this through large public transport subsidies.

In housing the cost of building continues to go through the literal roof: 10% up in one year and sustained increases for multiple years prior.

Now let’s check this out over the term: this government has had reviews of supermarkets, building materials, electricity prices, and transport fuel. It would be hard convincing anyone that their reviews have had positive effect on prices except temporarily on transport fuel.

What a New Zealand government committed to controlling consumer inflation would need to do is attack the corporations that put up these prices.

It would need encouragement and big resources added to the Commerce Commission, who already have powers in Telecommunications, Energy Networks and Airports, the Diary industry, Fuel, and then everything else covered under the Fair Trading and Commerce Act to protect customers and promote competition throughout the economy.

Most of what this government has done is support and directly subsidise major business through the COVID crisis, not hold them to account out the other side. Labour have been great at regulating smaller business such as residential landlords and farmers, not so much when it comes to the bigger end of town.

Whoever is in power in November 2023 will inherit a country in which consumer power is ever-more concentrated in the hands of a very few companies, and where takehome pay despite some increases is just driving more and more of us into harder and harder lives.

If Labour do not start facing up to corporate power extracting massive price rises from the people, they will leave inflation-forced economic management up to the Reserve Bank.

Currently they look like they are economically impotent. They are not.

Labour can and should be the dog, not the tail. We need a government who is prepared to make a sustained full-throated public torching of the oligopolies who are slowly ruining our country, then bring prices down, and then in doing so save their government.

37 comments on “Poor Regulation Is Burning This Government Down ”

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  1. Ad 1
    28 April 2023 at 10:46 am

    Dairy industry. Not diary industry.

    • Corey 1.1
      28 April 2023 at 12:23 pm

      That bloody diary industry needs to be regulated though! I'm sick of these dear diaries!! 😛

      • Shanreagh 1.1.1
        28 April 2023 at 1:38 pm

        Yes they keep adding days to days then months to months and that must be driving things up. Rampant and regular. We need 'to make a sustained full-throated public torching of of the daygopolies' otherwise Christmas will be here before we know it.

        smiley

        • Ngungukai 1.1.1.1
          28 April 2023 at 1:49 pm

          Interesting all the streams in Southland are dark brown, just an observation driving through on the bus last week from Dunedin to Invercargill.heartThe Diary Industry.

  2. AB 2
    28 April 2023 at 11:31 am

    They do the reviews and the consultations and the lengthy policy work in the hope that good data will protect them from well-funded disinformation campaigns and media attack once they try to act. It won't – their opponents are not persuadable, disinterested actors with a public good motive. If they don't act on this problem they will burn slowly as you say, but if they do act they might be burnt down quickly. They are stuck in that dilemma.

    It's a mistake I think to mention only the market/pricing power of the oligopolies, and not their political power as well. Both have to be thought of as illegitimate in a democracy.

    • Ad 2.1
      28 April 2023 at 11:45 am

      It would take the kind of deep research that Bruce Jesson and WB Sutch used to do on the political power of oligopolies for me to trace their political power. I'm not aware of researchers that do that stuff now, outside of tracking Select Committee presentations. Happy to be pointed in the right direction if there's good new academic research tracking it.

      • AB 2.1.1
        28 April 2023 at 12:20 pm

        Yes – I certainly don't know of any research along those lines either. I wasn't actually trying to be critical , just trying to convey my sense of how difficult the dilemma is.

    • roblogic 2.2
      28 April 2023 at 12:42 pm

      Exactly, the big end of town fights dirty. If Labour is truly interested in challenging their power they need a very simple and emotionally resonant message that cuts through all the fear and bullshit that's about to be launched.

      Put Kieran McNulty on it

      • Patricia Bremner 2.2.1
        28 April 2023 at 9:30 pm

        The uber-rich are not paying their share, yet they gave huge money to Act and National.

  3. Tricledrown 3
    28 April 2023 at 11:53 am

    The Foodstuff's Progressive duopoly should not be allowed to hold shares in the Warehouse which would break up their cartel.The oil companies cartel should face a windfall tax.Power companies,Banks are all screwing NZ over. They never get regulated even after enquiries prove they operate in monopolistic ways.Both govts pay lip service threaten to regulate.The Companies get their PR spin going for a few weeks after the outrage then go back to gouging.

    • Ngungukai 3.1
      28 April 2023 at 1:53 pm

      All parties and politicians are full of shit, talk a big game to get elected and then do jack shit, they are prostitutes to Big Business and their donors.

  4. Corey 4
    28 April 2023 at 12:55 pm

    I totally agree. Labour governments are elected to fix capitalism, regulate and reign it in and make it work better for everyone.

    This government quickly went from "capitalism/globalism has failed" "let's do this" to "let's have a working group/review" to "yes it's unfair" but I "categorically rule that out" really really fast.

    Labour governments are supposed to see problems in capitalism and iron them out, instead they are now a party that focuses almost solely reforming government bureaucracy.

    What really is the point of the NZ left if it's unwilling to reform capitalism and make our supermarket sector more competitive, while protecting our growers/suppliers?

    What is the point of a Labour government who keeps to the 40 year status quo when tens of thousands of kiwis rot in motels?

    While cost of living and housing spiraled out of control this government denied the problems for far too long and focused all it's energy on internal bureaucratic reforms rather than saving capitalism from itself.

    I know enough Labour mps to know they thought if they rocked the boat as little as possible they thought they could maintain the center and govern for another 15 years..

    The problem is, when you have a full majority and do as little as possible on real time ground level issues, you can't ever again say "give us more seats so we can deliver"

    Labour is supposed to be the party that saves capitalism from itself and get it running fairly again until the Torys run it into the ground and it needs to be saved again, the problem with modern labour governments is theyd rather govern for long stretches by doing as little as possible and so their traditional duty has been thrown out for political expediency

    • Ed1 4.1
      28 April 2023 at 3:16 pm

      By and large that is exactly what the government has done, despite the problems of a mass shooting, Covid, and Cyclones. Where the government has failed is not doing enough to show how well many of their actions and policies have worked – housing has seen a huge number of new dwellings, although not all through any particular named project – many did not believe that we would have some of the property value increases reversed . . . We saved more lives than any other country from Covid; we have wages that more can (albeit with some difficulty) live on; we had fewer businesses fold than other countries because of Covid; our unemployment rate is low, our health system did not fall over despite the best efforts of the previous government. But still even Labour supporters get sucked in by the National moaners, whose only solution is to cut the top tax rate . . .

    • Ngungukai 4.2
      28 April 2023 at 4:03 pm

      This Labour Government has been blaming the National Government of 9 years of inaction, now they are coming up six years of inaction and so many fcking reviews of things the average man on the street knows the fcking answers, when will this nonsense come to an end.

    • tWiggle 4.3
      29 April 2023 at 12:18 pm

      Housing and homelessness.

      National switched to outsourcing of emergency housing to third parties, eg. motels, in place of a state housing programme. Squeezed rental supply and rent extortion are common themes in the US, UK and Oz. Students living in tents, families living in cars. If anything, we are better off because of the rental tenancy security from recent legislation, and the longstanding govt Tenancy Service that holds bonds and mediates disputes between tenant and landlord.

      There seem to be 2 reasons. First, AirBnb allows second home owners to get sizeable returns without effort. They can bypass planning permissions required by accomodation businesses, and can finance the property without fultime tenants. Income tax and GST for this income went under the radar for a long time.

      The second is systematic expansion of larger players into the residential rental market in the past 5 years, a move that seemed to gain pace across countries like the US over the pandemic. Providing a roof is, with food, a rockbottom essential service. Informal cartels, abetted by professional letting agencies that take a percentage cut of the rent, can push the 'free' market price up and up with no justification.

      The NZ State Housing build began in the 1930s in response to extreme profiteering during the Depression. You can read any of Robyn Hyde's novels of NZ life round this period for a feel of the stress around housing for those without much dosh.

  5. DS 5
    28 April 2023 at 1:34 pm

    Another option – though Fonterra would not like it – is require that a certain percentage of dairy output be reserved for the New Zealand market. That would mean New Zealanders are no longer forced to pay world price for the dairy products we produce.

    • Ed1 5.1
      28 April 2023 at 3:18 pm

      What would prevent the companies still charging the export price?

      • kejo 5.1.1
        28 April 2023 at 3:29 pm

        Regulation ?

      • DS 5.1.2
        28 April 2023 at 4:22 pm

        If they charge the export price on "New Zealand designated items", they won't be able to sell all the produce. Ergo, local price drops in accordance with demand and supply/

        • Belladonna 5.1.2.1
          28 April 2023 at 7:56 pm

          What's to stop NZ buyers purchasing the dairy products and re-selling overseas?
          We saw this happening with the powdered baby formula when there was a quality issue with the Chinese factory.

          • DS 5.1.2.1.1
            29 April 2023 at 2:15 am

            Transport costs, combined with lack of economies of scale and lack of pre-existing contracts with overseas outlets.

            You don't make money by buying up individual blocks of cheese from the supermarket and then shipping them overseas at exorbitant cost.

            • Belladonna 5.1.2.1.1.1
              29 April 2023 at 11:32 am

              But apparently you do, by buying individual tins of baby formula and sending them off overseas.

              If there is a significant price differential, and significant demand, then private enterprise will take advantage of it.

              • DS …
                29 April 2023 at 12:12 pm

                Can you elaborate what happened with the baby formula?

                Price-differentials exist on a host of products, across a host of countries, and one might note that petrol costs to Middle-East consumers are markedly lower than they are in Europe. No-one buys up petrol containers in the Middle-East and sends them to Europe. Arbitrage is a thing, but transportation costs (and other factors) get in the way.

    • Ngungukai 5.2
      28 April 2023 at 4:05 pm

      Why would Fonterra want to sell on the Local Market when they can get premiums on the Export Market, the old addage is "Charge a Price that the Market Will Bear".

      • Patricia Bremner 5.2.1
        28 April 2023 at 4:12 pm

        There lies the problem. Business charges "what the market will bear" not what is just and fair… then they blame the government and the workers for the rises.

        Self regulation from profiteering businesses ????
        It IS a political football created by the haves always wanting more. They corner the market and thumb their noses at govt and us.

      • DS 5.2.2
        28 April 2023 at 4:24 pm

        They wouldn't want it. Hence the point that you'd be forcing them (amid their objections) to sell a percentage on the local market – which hurts Fonterra's earnings, but makes dairy products cheaper to NZers.

      • Tricledrown 5.2.3
        28 April 2023 at 9:04 pm

        how come i can buy a leg of vacuum packedNZ lamb infused with wine and herbs cheaper in Europe than in NZ.

  6. Grey Area 6
    28 April 2023 at 7:52 pm

    This is the NZ Labour Party – betraying NZ since 1984. Do you expect anything different? I used to think they might see the light and admit what they've done – nuclear free moment, transformational anyone? Nah.

    Do I sound bitter? Yes, I've been Red/Green voter in various combinations my entire life yet this current crew are shameful neoliberals who have no solutions because they won't break the mould and realise we need new answers to the old questions. Business as usual.

    Are Chippy, Grant and David going to save us? No, they're not.

    I expect National and ACT to crap on on us. I feel sad that Labour (and the Greens) are shitting on us as well.

    • tWiggle 6.1
      29 April 2023 at 12:32 pm

      The thing with National and Act this time round is that they will take an active role in dismantling health and education. They look to 10+ years of Liberal/National and Tory governments on Oz and UK. By underfunding, both seriously destabilised their national healthcare services, and grew a two-tier education system where State education resources and teaching quality dropped precipitously compared with private schools.

      Key took a sinking lid approach. Luxon sees the Oz and UK outcomes as aspirational and will be actively pursuing their crapulescent examples. Much bigger pile of shit ahead.

    • Mike the Lefty 6.2
      30 April 2023 at 9:17 am

      I'm feeling like you now, I'm worried that we have the potential for another Rogernome takeover to arise here. Like in 1984, started well but was hijacked by the free market wankers and didn't have the guts to fight back.

      The Opportunities Party are more like what Labour should be, I reluctantly have to say.

  7. roblogic 7
    29 April 2023 at 1:16 pm

    Every trip to the supermarket is more shocking than the last. In what world does the price of eggs double overnight, except in a time of war or famine?

    Labour must smash this goddamn duopoly or they will be kicked out of office for failing to manage the cost of living in this 'land of plenty'


    https://www.theguardian.com/world/datablog/ng-interactive/2023/apr/19/food-costs-soar-in-new-zealand-see-how-prices-have-changed-with-this-interactive-chart

    The price increases come as supermarket profits remain high in New Zealand, and the government continues investigations into how to better regulate the supermarket corporation duopoly. The commerce commission concluded in 2022 that the major supermarkets were making around $430m a year in excess profits, and returns of 12.9% on capital, when strong competition should produce returns of about 5.5%.

    • Grey Area 7.2
      29 April 2023 at 6:53 pm

      This iteration of Labour will not, and cannot make the systemic changes you suggest. It's not in their neoliberal DNA.

      We're screwed to the left (centre) and the right.

      Anyone who thinks Chippy's Labour can or will save us is dreaming.

      Feck, it's a depressing being a vaguely "left" person in Aotearoa New Zealand in 2023.

      • roblogic 7.2.1
        30 April 2023 at 6:41 pm

        Labour’s gutless incrementalism and endless working groups aren’t really gving me much confidence either. I remember a labour PM who said “capitalism is a blatant failure” and then proceeded to ignore the WEAG, chicken out of CGT, and will probably be too timid to listen to the latest tax working group.

        A simple copy/paste of Australia’s tax system and unions would do wonders. NZ has been in a fucked up austerity mindset for too long.

        I will probably vote for TPM

  8. tWiggle 8
    29 April 2023 at 2:18 pm

    https://www.abc.net.au/news/rural/2023-04-27/steepest-price-increases-for-milk-cheese-in-decades-abs/102268236 Oz at 15% for dairy and 12% for bread and cereals over the last year.

    In the UK, dairy and eggs have increased by 29% and " the price of some lines of staple foods such as cheddar cheese, white bread and pork sausages have soared by up to 80% in some shops over the past year, as much as eight times the headline rate of inflation."

    https://www.theguardian.com/business/2023/apr/19/why-are-uk-food-prices-up-by-19-and-which-foods-are-worst-affected

  9. georgecom 9
    29 April 2023 at 5:33 pm

    a one off, or maybe 2 year, super profit tax on the likes of banks, ear mark the money for the cyclone rebuild. from there a capital gains tax on realised capital gains with the proceeds going toward rebuild/build better and some for lifting tax threshold levels on the first 2, maybe a small one for the third,

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