This was the election that finally took on the broken markets ripping off Kiwis – Bryce Edwards

The most encouraging development in this election campaign is the willingness to take on the companies dominating essential markets and ripping off New Zealanders.

I have argued for years that broken markets sit at the heart of the country’s deeper problems, and that politicians have been too timid or too captured to confront them.

By “broken New Zealand” I mean an economy in which essentials cost too much and public services and wages have stalled, and those companies are a large part of why.

Every party with a realistic chance of being in the next Parliament took a grocery policy into the election, and all except Act proposed restructuring the dominant groups or creating publicly backed competitors.

National’s shift matters most, because once it accepts that a failing market can be restructured, future governments of either stripe will find it much harder to argue otherwise.

Labour’s proposed ban on excessive pricing would cover food, power, fuel, transport, telecommunications, banking and insurance.

NZ First campaigned on splitting the big gentailers into separate generation and retail businesses, and the Greens proposed a state-owned company to supply firmed power to smaller competitors.

In banking, NZ First wants to buy back BNZ and merge it with Kiwibank, while Labour would open up payments systems to fintechs and create a pathway for payment companies to become digital banks.

Broken markets are a textbook case of concentrated benefits and diffuse costs: a handful of firms gain a great deal from weak competition and can afford to defend it, while millions of households each lose a little and rarely organise.

The Commerce Commission estimated in 2022 that the major grocery retailers were earning excess profits of about $1 million a day.

Business leaders responding to the Herald’s Mood of the Boardroom survey scored every supermarket policy below 2 out of 5, from 1.83 for National’s to 1.15 for KiwiMart.

Fran O’Sullivan’s reply to the business lobby’s property-rights argument is that “defending private property rights cannot become a convenient slogan for defending incumbent market power”.

Competition law, she adds, “exists precisely because the market does not always police itself – the supermarkets are arguably a case in point”.

What changed this year was pressure from voters.

NZ First and the Greens forced the pace, and the smaller parties gave voice to public impatience.

NZ First proposed splitting Foodstuffs in April, and the Greens launched KiwiMart on September 6, 10 days before National announced its own plan.

Christopher Luxon called the Greens “communists” for proposing to nationalise 120 supermarkets, but the attack did not stop them reaching their best result in 1News-Verian’s polling in the following weeks, which gives their market-reform programme potential weight in coalition negotiations.

At the ASB finance debate in October, Opportunity leader Qiulae Wong said she no longer trusted politicians “to take action on the expert advice that the Commerce Commission gives us”.

Consumer NZ chief executive Jon Duffy makes a case in the Helen Clark Foundation’s new book, Facing Up to Our Future, that market reform in New Zealand has often been “incremental and cautious, tinkering at the edges and leaving the underlying drivers of poor market performance largely intact”.

The interventions he canvasses range “from gentle nudges to forced divestiture or increased (or total) public ownership”, which is close to what the parties are now offering.

Where leaving things to the market “will only perpetuate the status quo”, he argues, “solutions should focus on how to disrupt those markets”.

Duffy puts the political obstacle plainly: “The hardest part will not be coming up with the analysis and potential solutions; it will be finding the political backbone to implement them”.

Coalition bargaining and corporate pressure will test that backbone soon enough.

Whatever happens on Saturday, concentrated market power in essential services is now a test the next Government will be judged on.

The campaign was also far thinner on productivity, jobs, health, population and infrastructure. Fixing broken markets is only one part of fixing a broken New Zealand, but it is a start that few would have predicted when the year began.

This election campaign took on broken markets, but it did far less about the bigger problems of productivity and incomes that have lagged for decades, an ageing population, a health system short of staff, and a backlog of infrastructure that someone will have to pay for.

Taking on Foodstuffs and Woolworths let the parties side with voters against two unpopular companies, but these problems raise a less comfortable question about who carries the cost.

National ruled out new taxes altogether, and Labour confined new revenue to a targeted capital gains tax.

Both had plenty of ideas, but the campaign rarely tested whether their promises could be paid for and staffed, and voters and the critics share some of the blame for that.

Dr Bryce Edwards is the director of the Democracy Project which scrutinises vested interests in politics. You can read more of his work here.

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