New supermarkets that could boost competition will be eligible for fast-tracked approval, under changes announced by the government today.
Building consent processes will be streamlined too, Finance Minister Nicola Willis said, and the Overseas Investment Act amended to clarify “pathways available for grocery investments, including through grocery-specific provisions”.
“We’re creating an express lane for new supermarkets to boost competition and deliver better deals for Kiwi shoppers,” Willis said.
In June, the IPSOS Issues Monitor survey had Labour overtaking National as the party New Zealanders believe is most capable of handling the cost of living.
Food prices were about 3% higher in New Zealand compared to the OECD average, and higher than in the UK or Australia, Willis said.
Last month, following a meeting with Fonterra’s chief executive where the soaring price of butter was discussed, Willis said the best thing the government could do was increasing supermarket and retail competition in New Zealand, in order to put downward pressure on prices.
Cabinet has also issued a formal request for information from supermarket companies looking to enter New Zealand on what regulatory changes they wanted to see.
“The responses revealed widespread frustration with restrictive zoning, slow consenting, and cumbersome regulations that make it extremely difficult for new competitors to gain a foothold in the New Zealand grocery sector,” Willis said.
Key themes, she said, included:
- “Restrictive council zoning, resource management and building consenting issues are a major frustration for businesses wanting to enter or expand in the New Zealand grocery market.
- “Limited access to suitable sites for new supermarket development.
- “Accessing competitively priced groceries from domestic suppliers is difficult. The wholesale regime is not working well.
- “Some regulatory barriers exist, including consenting timeframes and food labelling requirements for imported products.”
In response, she said the government would:
- “Legislate so that new supermarkets which would improve grocery competition regionally or nationally will qualify as fast-track referrable projects under the Fast-Track Approvals Act.”
- “Streamline building consenting processes for new supermarkets by selecting a single building consent authority to standardise and streamline building consent processes for grocery developments that would enable competition regionally or nationally.”
- “Amend Building Act regulations to facilitate pre-approved ‘MultiProof’ building plans for multiple grocery developments.”
- “Improve the operation of the Overseas Investment Act regime by clarifying the pathways available for grocery investments, including through grocery-specific provisions in the Ministerial Directive Letter.
- “Amend the Commerce Act to better combat ‘predatory pricing’ with the introduction of an objective economic test for the prosecution of firms misusing their market power to exclude or stamp-out competitors.
- “Actively explore options for potential importers of food to bring new product lines into the country.”
Legislation was expected to be introduced to Parliament in November and passed by the end of the year.
Willis said Woolworths reported costs of $3 million over four years to get resource consent for a single new supermarket. The changes, she said, would mean that process would now take under a year.
Willis said the arrival of Costco into the West Auckland market had “markedly changed competitive dynamics in that local area and has provided a major export-pathway for New Zealand food producers”.
“Costco has confirmed the government’s express lane consenting approach will assist with their future expansion plans. They have also confirmed they can see opportunities for new stores to be built in New Zealand in the next few years.”
She expressed disappointment in other offshore chains, such as Aldi and Lidl, for not responding to the government’s call for suggestions.
There remained no plans to break up the existing Woolworths/Foodstuffs duopoly, which accounted for about 82% of the market.
“A decision to restructure the supermarkets is not a decision that would be taken lightly. It would be a significant intervention that would carry costs and risks that would need to be rigorously weighted against the potential benefits to shoppers.
“A cost-benefit analysis is underway on specific options for restructuring the duopoly and will inform future advice I intend to take to Cabinet on whether further legislative changes are required to improve competition.
“Our objective is a more competitive grocery market that delivers better prices and more choice for Kiwi shoppers. We remain open to potential market-led solutions that may be put forward by the major incumbents.”
