And don’t forget fuels. Prices are expected to remain high and continue to face upward pressure due to ongoing global supply disruptions, conflicts in the Middle East, and tight inventories.
These also affect the persistently high “cost of living” which political polls indicate is top of mind for New Zealanders heading into the November 7 election.
But, while there have been competition reports aplenty over the years into some key sectors, governments have mainly shied away from major action.
New Zealand’s grocery sector is highly concentrated and the Commerce Commission has spent years examining whether competition is sufficient.
But why does Willis’ swinging baseball bat stop short at the New Zealand-owned supermarkets? Why smash up the Kiwi-owned chains and not Australian-owned Woolworths?
Why put a higher value over the property rights of investors in the Australian-listed Woolworths above those of the local owners who belong to a supermarket co-operative?
On the tax front, the brackets had been left unchanged for years while nominal wages rose, dragging more income into higher marginal tax rates. Willis’ 2024 tax package explicitly argued that bracket indexation was necessary to stop what it called “fiscal drag”.
The coalition argued the 2024 “tax cuts” – which cost $14.7 billion over four years – were fully funded. But net debt still increased by $12b. Hence the widespread view that Willis borrowed to fund the cuts.
In an era where governments – like the Coalition – fail to cut expenditure with enough alacrity to balance the books quickly, fiscal drag is a thing of beauty. And it is currently helping repair the Government’s books.
The Treasury expects fiscal drag, alongside a cyclical recovery in tax revenue, to account for 0.8 percentage points of the Government’s 3.5 percentage-point fiscal improvement between 2026-27 and 2029-30.
The other components are 2.3 percentage points from reducing core Crown expenses as a share of GDP, and 0.4 percentage points from improved state-owned enterprise and Crown entity performance.
The Treasury’s Budget 2026 forecasts show the operating balance before gains and losses and excluding ACC remaining in deficit through 2027-28 before moving into surplus in 2028-29.
Net core Crown debt is forecast to rise from 42.4% of GDP in 2025-26 to a peak of 46.1% in 2027-28 before declining.
But when the Government is still borrowing heavily, why should bracket creep automatically become tax relief?
Willis skirted around this question at Business New Zealand’s pre-election conference in Wellington earlier in the week.
She teased the audience, saying that National would have something to say on bracket creep after the Pre-Election Fiscal update is released on September 29. Adjusting tax settings would ensure “working people on average aren’t being slapped with bigger and larger effective taxes every year”, she said.
Her two coalition wingmen, Act’s David Seymour and New Zealand First’s Shane Jones, were not so sure.
Seymour was more focused on tax architecture. Jones took a fiscally literate approach, warning to be careful how much revenue you take out of the fiscal line without reducing costs – “given the challenges that we’ve already got”.
The Treasury numbers are not catastrophic. Indeed, the fiscal outlook has improved relative to earlier forecasts.
The Government’s bond programme has been reduced by $6b across the forecast period. But net core Crown debt is still forecast to reach $232.4b in 2027-28. Inflation is also on the march along with bond markets.
But while the coalition spokespeople at the BusinessNZ event – and those representing other parties – were unanimous that debt was a first-order problem, the majority were unwilling to touch the largest and most predictable driver of it which is the cost of New Zealand Superannuation.
On that front, Willis deserves credit for being rational that the qualifying age of 65 needs to move.
The Finance Minister would get some brownie points if National came out and made future tax threshold adjustments explicitly conditional on fiscal performance by establishing a rule that threshold indexation happens when the Government has returned the operating balance to surplus and debt is demonstrably on a sustained downward trajectory.
That would turn tax cuts from an election promise into a fiscal dividend.
On the supermarket front, Willis has also signalled that National would pursue a structural separation of Foodstuffs, potentially turning New World and Pak’nSave into independent competitors.
But breaking up a supermarket chain is not the same thing as making food cheap. The grocery bill is the end of a supply chain. And somewhere in that supply chain also sits New Zealand’s dairy industry.
If the Government is serious about the cost of living, it should follow the dollar all the way from the farm gate to the supermarket shelf.
Willis ramped this issue up with former Fonterra boss Miles Hurrell last year but backed away from serious action.
And then there is banking. If concentrated markets are the problem, why is banking somehow different? New Zealanders borrow money to buy houses.
Businesses borrow money to invest. Farmers borrow money to buy land and equipment. The cost of capital runs through virtually every part of the economy.
So if National is going to campaign on competition, where is the equivalent political heat on bank competition?
The major banks have enormous balance sheets, established customer bases, sophisticated funding operations and formidable barriers protecting their market positions.
National cannot credibly present itself as the party of fiscal responsibility and competition while treating tax cuts and selective attacks on corporate concentration as though they exist in separate universes.
That is where the election debate should be heading.
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