Our big businesses may not be the big problems politicians make them out to be

Wednesday, 3 June 2026

The electricity market has come in for particular scrutiny from politicians, but our prices remain competitive internationally argues Catherine Beard.

Catherine Beard is BusinessNZ’s director of advocacy.

OPINION: All political parties are starting to compete hard for votes, as is always the case in election year.

But the voting public should be careful what they wish for and be prepared to do a bit of fact checking, because “bumper sticker” policy or an appealing sounding slogan could leave consumers and businesses worse off than the political party would have you believe.

Maybe politicians should have to take a Hippocratic Oath like doctors, to “do no harm”, because knee-jerk populist policies can do a lot of harm.

So far, we have had politicians threatening to break up electricity gentailers – on the promise it will improve competition and deliver lower energy prices. Will it? The jury is out.

We have had politicians threaten to break up the supermarkets, again on the promise it will increase competition and make food prices lower. Will it? What if the reverse happens?

We have also had a spotlight on banks (public enquiries, focus on profits etc) but also at the same time had a succession of Governments increase their costs (eg, the amount of reserves they have to carry, complex rules around how much they can lend and the amount of information they need from customers to make those decisions), all of which adds cost.

Questions consumers should be asking to determine a competitive market include, do I have a choice of banks and is it easy to change banks if I am not happy with my current provider? Does my bank have a solid credit rating with ratings agencies and is my money likely to be repaid?

All that constant scrutiny and rule changing does to banks is increase their costs (as we saw with restricted lending policies) and could be very off putting to new banks wanting to enter NZ. They ask themselves, is it a predictable regulatory environment and how many customers are in the market, and how many other banks are already here?

Supermarkets have had “the full political blow torch down their trousers”, writes Catherine Beard, but are their prices as exorbitant as has been made out?

We should fact-check whether the banks are really making super profits in NZ, how do they compare to other businesses listed on the NZ Stock Exchange? Looking at the statistics, banks are now earning a return on equity (ROE) of around 11-12%, while top NZX growth firms can have an ROE of 20-30%. Mature NZX industrial, utility or property firms can have an ROE of between 5-15%. So, the data shows that they are about middle of the pack.

Now, lets look at supermarkets. They have had the full political blow torch down their trousers, due to the political narrative that the “cost of living crisis” is due to a lack of competition due to the dominance of two big supermarket chains. They had a Commerce Commission enquiry, the establishment of a special grocery commissioner, multiple expensive enquiries.

The most recent report on grocery actually had some good findings for consumers, but these were not highlighted in the press release from the Commerce Commission or the subsequent political narrative.

If you look at the report you will find that gross margins from supermarkets reduced in 2024, which may be due to intensified competition, that Woolworths NZ margins were the lowest pre-tax and post-tax of all grocery retailers compared internationally and that grocery prices in New Zealand are lower than Australia and the UK when adjusted for GST.

The press release did not acknowledge the GST aspect, despite the body of the report acknowledging that New Zealand is an outlier in applying GST to basic food items (the UK, Australia and Ireland are mostly exempt from taxation).

Now to the electricity sector. Political commentators would have you believe the situation is dire and the gentailers have too much market power and they need to be broken up to reduce power prices.

The data and facts paint a different picture. Since 2014, retail electricity prices (inflation adjusted) have remained steady and even fallen over the 2020-2024 period, with an uptick in the last two years and much of that has been driven by the gas shortage and increasing lines charges.

Lines charges will need to increase because we need to invest in more capacity with a growing demand for electricity. When inflation is higher that flows through to lines charges as well. Commercial and industrial electricity prices have seen more of an increase recently, but again this has been driven by the gas and transmission issues.

If we look at how we stack up globally with our electricity prices we were in the most affordable group at 10th cheapest in the OECD in 2024 for residential and the 6th cheapest for industrial prices in the OECD, according to the International Energy Agency.

On top of that we have current investment in new renewable electricity generation that is bigger than the Think Big era of the 1980s, when all the big hydro stations were built. The forward prices for energy contracts for the next three years are down around 25%, showing the sector is back on track for plenty of new electricity supply coming on stream.

The Government-commissioned Frontier report on the electricity sector is the most recent in-depth review of the sector, and it concluded that it is a competitive market and that even “virtual” separation of the gentailers should not be adopted as it would impose higher energy costs onto consumers and industry. Higher costs! This is what some politicians are promising to do, which when you look at the facts and data would be the opposite of good policy.

The Frontier report also found that the biggest single impediment to new investment in the electricity system is “sovereign risk”, which are fancy words for political interference in the market. Why would anyone invest if the rules can be changed and your investment can be destroyed by political flip-flops. It is the same for any investment in New Zealand, whether that be in banking, grocery, energy, forestry or infrastructure.

New Zealand has a very small population in a large country, and it is hard to make a profitable business investment here because of those factors.

To counteract that and to encourage competition and investment, we need a long-term vision for New Zealand that includes growing the population and a regulatory environment which is stable and consistent, and not changing every three years on the back of sloganeering and bumper sticker policy.