Nicola Willis makes the supermarket changes she can

Wednesday, 27 August 2025

The supermarket duopoly is still front of mind for the Government, which aims to make it easier for other players to join the game.

ANALYSIS: At the start of the year Nicola Willis lashed “the supermarket lobby”, grabbing on to competition policy as one of the big economic reform levers in her new job as Economic Growth Minister.

In an environment of low growth and fiscal belt-tightening, it was something to try to set the early year agenda with.

Then by the end of March she was dangling the threat of supermarket de-mergers should a third player not get into the mix, which the Government was going to bend over backwards to encourage.

That threat remains on the table ‒ but probably in name only ‒ in the form of a cost benefit analysis on various structural options being undertaken by officials.

The changes all look pretty sensible as far as they go: making it easier for new competitors to come into the market, making it easier for overseas operators to get approvals via the fast track and so on. It’s called the express lane.

All pretty sensible, all probably should have been done years ago. That said, Labour did do a bunch of work on supermarkets ‒ it just didn’t fundamentally achieve what they, agitators for reform and the Government all think is required: a third player.

The divergence is over whether that outcome should be delivered by Government, whatever it takes.

And at the start of the year Willis had appetite for this, essentially arguing that poor regulatory decisions had allowed far more market concentration than should exist. In fact, she still seems to at some level.

But there are really only two things that would guarantee a third competitor: the Government underwriting a new player or the Government somehow breaking up the current players, Woolworths and Foodstuffs. The former would take a big amount of risk and moral hazard onto the Government’s books and the latter would be a nuclear option that smashes property rights and raises the spectre of sovereign risk.

Then there is the third option, which doesn’t guarantee anything but clears any government obstacles and leaves it to the market. That is more or less what Willis has done.

The fact is that this is the policy you do when you your own party is a bit nervous and your coalition partners are simply not on board with radical changes.

ACT has made it very clear to Willis that she doesn’t have the numbers for anything beyond levelling the playing field and making investment easier.

Willis has signalled that this is the first of a number of announcements she expects to make on the issue.

The Finance Minister said the Government would use its power to amend regulations with the goal of speeding up the process of opening supermarkets.

But the sharp political questions are now around whether having ramped the issue up and then doing a bunch of things the public doesn’t really understand just makes the Government looks weak.

And related to that is whether supermarkets reform is really the thing to spend political capital on. Any benefit of radical change will take a long time to be felt, assuming that a third player resulted in lower prices through competition.

You never say never, but there will almost certainly be no radical supermarket overhaul under the current Government.

None of this stuff is easy, but the changes made reflect the political reality of coalition numbers and property rights rather than the probable, but still theoretical, competition benefits of a third supermarket player.