Wellington (Monday, 2 October 2023) - The New Zealand Initiative welcomed today’s announcement that a re-elected Labour government would ease the path for
new grocers to enter the New Zealand market.
But it also warned against subsidising entry.
The Labour Party announced today that it would “back credible companies wanting to get into or expand into the New
Zealand grocery business. This could include finance, making sure land is available, regulatory changes, incubating
innovation and accelerating competition.”
The New Zealand Initiative’s Chief Economist Dr Eric Crampton said, “It has been effectively illegal for any new
large-footprint supermarket to enter the New Zealand market at scale.
“If an entrant like Aldi or Lidl were somehow able to find sites with the right zoning, they would also need Overseas
Investment Office approval on their sites. Then, they’d have to wait years for permission to build. All of it makes New
Zealand simply not worth the effort.”
“Any incoming government should make it simple for new players to secure necessary zoning changes and consent to build.
It should direct the Overseas Investment Office to consider new grocery retail as being in the national interest. And it
could even consider mixed-use zoning liberalisation to allow apartment towers above new supermarkets. Competition and
potential competition do more to protect consumers than any grocery regulator.”
The Initiative’s submissions during the Commerce Commission’s market study into grocery retail highlighted regulatory
barriers to entry, which were then emphasised in the Commission’s final report. The Initiative also warned that the new regulatory code, which could require an entrant like Aldi to supply existing
supermarkets with Aldi’s products at government-regulated prices, could discourage entry.
Dr Crampton continued, “If regulatory entry barriers are eased, grocers like Aldi or Lidl will come here if they find it
profitable to do so. But dangling a promise of government-subsidised financing or other sweeteners would have perverse
consequences. Retailers who would come here anyway may hold out in hope of subsidy. And others who enter only because of
a subsidy are likely to demand ongoing subsidies.”
Submission: The Grocery Industry Competition Bill