Talking Points

How come food is so expensive in New Zealand?

The topic comes up on a regular basis among my fellow migrant friends.

“Have you seen how much [insert veggie/fruit] cost these days? [Insert dollar amount], absolutely insane!”

I had this very conversation today in the office, during my lunch break. This time, it was about tomatoes, and the price was $15/kg. That’s seven or eight times what we would pay for in the Old World, where I come from.

So, why on Earth is food so expensive in New Zealand – even more expensive than Australia?

It turns out, it’s not just our gut feeling. A couple of media outlets have run the numbers of late, and here are some interesting findings for you (so next time a friend brings up grocery prices at the dinner table, you’ll know what to say).

It’s because we’re few

Fact: New Zealand ranks 200th in the world by density of population, and 126th by population itself. We’re outnumbered by many, including our neighbours across the ditch. At 25 million, Australia has five times our population, and being bigger means they win in the economy of scale. Put simply, they can produce more stuff for less.

The same, of course, goes for much of the rest of the world too. But that’s not the whole story.

It’s because we export a lot

New Zealand does export a lot to Asia and the East, and this puts pressure on prices across the board. It’s the beauty of New Zealand’s export-driven model. We produce a lot here, enough to feed 40 million people. But because we don’t have 40 million people to feed, we export most of it.

As a result, global markets set the price in New Zealand: if you think about it, if veges and fruit cost less here, it just wouldn’t be profitable for producers to sell domestically. At least, this is the gist I got from reading around.

If you’d like to know more, RNZ did an awesome job this month with their special on “Who’s eating New Zealand?“. Don’t miss it, it’s eye candy.

It’s because of the supermarket duopoly

I wonder how many realise that there are just two supermarket chains in New Zealand: on one side we have Foodstuffs (who owns New World, Pak’n’Save, and Four Square), and on the other Australian-owned Progressive Enterprises (who owns and operates 183 Countdown supermarkets throughout New Zealand). I guess that’s basic knowledge for Kiwis, but not so much amongst migrants.

In November 2020, the Commerce Commission started a year-long study on whether competition in the grocery sector is “working well” (spoiler alert: probably not). Coincidentally, the draft report for consultation is due to come out tomorrow.

And the interesting thing about all this is that, up until 2001, there were actually three players in the grocery market. That was before the Commerce Commission allowed Woolworths to buy Progressive Enterprises (Foodtown) – oopsie daisies!

Is the system beyond repair? Some economists believe New Zealand is too small for a third chain. Don’t tell Costco, though: after years of delays, they’re apparently on track to open their Auckland wholesale warehouse in early 2022.

And yet, people are going hungry here.

Now, you may ask, if New Zealand produces enough food to feed 40 million, how can it be that nearly 40 per cent of New Zealand households experience food insecurity, and 19 per cent of children live in such households?

Again, price: when export prices push up domestic prices and rent costs increase, some families just don’t have much left in their food budget. As a result, many children are not getting their nutrients from the healthiest sources, and New Zealand ranks pretty bad when it comes to obesity, diabetes, and cardiovascular disease.

Time for a National Food Strategy, maybe?