Nicola Willis: National's Finance Spokesperson on their proposal to split Foodstuffs in two to drive supermarket competition
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What is the National Party’s proposal for splitting Foodstuffs and why does it matter?
Question How many ways can you slice up a supermarket? New Zealand first says everyone's copied them. The Greens want some sort of Soviet style operation. Labour are against gouging and may or may not end up breaking them up. The Nats of war of course want this commerce commission to have a look. And if they give the tick, uh presumably the splitter's on. Nicola Willis says National's finance and economic growth spokesperson, of course, and is with us. Good morning. Good morning, Mike. Is there an element of theatrical frenzy around all of this now?
No, not at all. This has been a lengthy, deliberative, analytical process in which there have been lots of econom economists who've said, actually, this system isn't working, it's not competitive, it's not efficient. We've gone and tested that with detailed modelling. We've had the former chief economist of the UK Competition Authority review that modelling in detail. All of that analysis has been conclusive that for In New Zealand, given how unusual our grocery sector is, this sort of a restructure would lead to benefits to the Kiwi shopper which would outweigh the costs. Now that is a robust economic analysis, it's different from the reckons of others, but that is what the economics says.
Fantastic. Why don't you just do it then?
Because what that analysis also says is you would be best given this is a significant change to test all of the implementation assumptions, to test the cost data, and to do that through a full discovery process. By giving the Commerce Commission investigative powers and information gathering powers, they can ensure that an implementation plan is fully robust and then assess, well, having done all of that, does Does it still stack up? So I think we've come up with an elegant proposal which says don't have the politicians sitting around doing half back reckons. Instead get a independent competition watchdog to do this approach and then if it makes sense, go ahead with it.
Why are you doing it now, not earlier? No one's jaw boned this more than you.
How did Nicola Willis describe the economic modelling that supports the split?
Because I wanted to make sure we'd done all of the analysis. I first uh received a cost benefit analysis in October last year. I then wanted to test it very thoroughly. So we've had a range of independent experts test it. We've enhanced the modelling. We've checked the assumptions. I then had a second version of the cost benefit analysis come to me in July. I don't want to be a bullet of gate on this. I think this needs to be thorough, it needs to be is passionate and needs to be analytical.
Right, some text, Mike. It's worth noting that the reason they haven't gone after Woolworths is because they're listed on the Australian Stock Exchange. Is that true?
Incorrect and in fact what the analysis shows is that Woolworths will not be getting off scot free here. The ensuing price war that would occur with a restructure of this sort will affect Woolworths too. They will be forced to increase their range and offer lower prices as well.
Mike, can you ask Nicola a specific question? The report stated page seventy, regional pricing would get worse for customers will last five to six years. This is due to foodstuff structure subsidizing regional deliveries, true or not?
Not true. What the report says overall is that the benefits of lower prices would flow to all regions, including rural areas where there's currently very limited choice for many New Zealanders and small communities. The evidence is there would be a much greater incentive for PAC and Save to compete and set up potentially alternative formats and compete for those customers. In fact, some of those rural stores are more profitable than stores in urban areas.
Why don't you do banks as well?
Uh, because I haven't had evidence that says that anything of this sort would enhance banking competition. Uh the advice I've received on banks is first deal with the regulatory barriers, which we've been doing through the Reserve Bank, ensure you have open banking so new FinTechs can compete uh and ensure that the rules of the game don't stop Kiwi Bank and others from growing to scale so they can take on the incumbents.
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