Eric Crampton: NZ Initiative Chief Economist on a new fast track plan to introduce competition to the supermarket sector

A new plan is being touted as a way to fast track shaking up the grocery sector. 

The New Zealand Initiative is proposing allowing new entrants to enter the market, rather than forcing any break-up of the existing supermarket companies. 

It outlines the need for fast track plans for rezoning, consenting, overseas investment clearance, and a more neutral stance from the government. 

Chief Economist Eric Crampton told Mike Hosking a new entrant should get a head start. 

He says within five years the government would find out whether planning barriers are what's held companies back. 

Foodstuffs and Woolworths are both members of the New Zealand Initiative. 

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Episode Transcript

Speaker 1 (00:00):
The New Zealand Initiative back this morning, looking into this
much devided supermarket setup of ours. They've got a blueprint
they climb, fast track plans for rezoning, consenting, investment clearance
and more neutral stains required for the government. Eric Crampton,
Chief Economists, Well, this's Eric morning to you.

Speaker 2 (00:13):
Good morning.

Speaker 1 (00:14):
You're talking already to a partially converted government. The government
seemed to be on your side. Is there something? Why
haven't they done what you're suggesting of? What you're suggesting
is workable.

Speaker 2 (00:24):
I think that they're expecting that resource management reform that
Minister Bishop is progressing will solve the problem, and we
hope that they're right. But the government is in a
big hurry to affect faster changes competition in the sector.
This will give them a pathway to do that on
the timetable that Minister Willis is looking towards, and it
would bring forward the kinds of changes that we're expecting

(00:45):
from the next set of resource management reforms.

Speaker 1 (00:47):
Why haven't they thought of what you've thought of?

Speaker 2 (00:51):
I expect that they would have been told that it
was too it would take too long to put together
the kind of package that we've put together. The bureaucracy
moved a little bit more slowly than we do. We
think that this be drafted fairly quickly and then introduced
by the Christmas.

Speaker 1 (01:03):
Why would you block out for a free thinker, why
would you, in looking to fast track all the people
who want to come to the country allgiately opened supermarkets,
block the current players out of that process if they
wanted to do something with the new rules as well.

Speaker 2 (01:16):
Well, we have a sunset it actually, so the minister
is really keen on getting new entrants, so she's talking
about some pretty dramatic moves for doing that. Ones that
don't respect property rates very well and introduce a lot
of uncertainty into the sector. We're suggesting suggesting that a
new entrant should get a head start, give them five
years with access to this kind of planning framework to

(01:37):
find out whether all of the planning barriers are really
what's been holding somebody back, because there have been a
lot of allegations that supermarkets are earning super profits. Well,
international grocers they love profits as much as anybody else.
So if those profits are real and we get rid
of the barriers, they should be jumping in at the
end of that window. Open it up to everybody so
that existing grocers could go in real head to head

(02:01):
competition because right now, town plans often forbid there from
being more than one supermarket in the place, or limit
the size of the supermarket so they can't compete with
each other too much. It's insane. We need to change it.
This will enable more entry or expansion from an existing
small New Zealand player.

Speaker 1 (02:17):
But you're ringing the market. And what if you're wrong,
and what if you kill the supermarkets in the main
time while they're sitting there whiting for five years for
a whole cluster to unfold.

Speaker 2 (02:25):
Well, they've already got an awful lot of stores. They
would continue with those. This would let a new entrant
come in get themselves established before the existing ones started expanding.

Speaker 1 (02:36):
Jeez. So you're on the same side as the government.
There is something wrong with the market. Yeah, And simple.

Speaker 2 (02:42):
Terms, what is wrong with the market is that it's
been basically like you can't say illegal because you wouldn't
throw somebody in jail for trying to start up a supermarket.
But the processes that we have layered on top of
any of this make it effectively illegal. Like maybe a
costco can come in and set up one big site
and that's awesome, but it's been pretty much impossible to

(03:03):
set up a new version of like Woolworth or New
World or like a Tesco.

Speaker 1 (03:08):
And you are that's what a part. You are confident
that if you did this, there are people out there
globally at scale that would go we're in boots and
north I'm not.

Speaker 2 (03:20):
This is this is a way of discovering it right.
So the Minister has been going out trying to find
international entrants. You hear scuttle about around town of various
players who may have said said no, but that's all
within the existing planning framework that makes it painful to
try to enter the new deal in market. This lets
us discover whether a new entrant would really want to

(03:40):
come in and whether there really are superprofits here to
be chasing after all.

Speaker 1 (03:43):
Right, Eric, good to have you on the program, as always,
Eric Crampton, who's the chief economist at the New Zealand Initiative.

Speaker 2 (03:49):
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