[Discuss] Things that were meant to bring prices down but have not. (?)

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#3216049 9-Apr-2024 11:31

Groucho:

Don't forget how Jenny Shipley's deregulation of the building industry made building a lot cheaper. How'd that work out 25 years later?

I think it is regulation not de-regulation that makes our building expensive. The classic example is the price of gib board and the lack of certified imported alternatives. It took until 2022 to finally allow some imported alternatives. Other examples are the compliance and permitting costs and zoning. If it was a free-for-all (not suggesting such a thing) then houses could be build for much less cost.

johno1234

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#3216052 9-Apr-2024 11:33

elpenguino:

Well, when you put it that way, the sales pitch for neo-liberal economics was that companies would be free to compete to sell things to us.

The supermarkets and many other companies don't seem to be competing too hard.

Indeed. In fact they actively prevent competition by landbanking potential competitor sites or leasing them with clauses preventing supermarket use.

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#3216060 9-Apr-2024 12:00

The key is balance. Libertarians like Seymour believe in zero regulation; the Invisible Hand of the Free Market will sort everything out. Except that it doesn't, especially not in mature markets where massive companies can block out potential new competitors like the supermarkets with land banks & covenants, or Vodafone and Telecom with it requiring well over $1B to setup a network even vaguely matching theirs and a massive monthly bill for termination.

At the other end of the scale you have the building materials issue where it is almost impossible to use anything other than GIB-branded plasterboard because there are so many hurdles to jump over to get approval.

In the telecommunications market we have balanced regulation. There are some rules which the telcos can't break; if a fourth entrant comes along and builds a mobile network in a few cities, all three big companies would be obliged to offer national roaming on their networks. All three would be obliged to offer reasonable termination rates. That balanced regulation put 2degrees on the market and also allowed it to halve prices overnight.

You wouldn't suggest we repeal the law against murder on account of everyone can walk around armed and just shoot anyone who tries to shoot someone else. Well, not unless you're the USA anyway. Because we know how that works: a massive body count. We have to have regulation to protect people from corporations, and little corporations from big corporations. Corporations are not your friend, and they will do whatever they are allowed to do to increase their profits.

There are undoubtedly some regulations that could sensibly and safely be relaxed, benefiting everyone. David Seymour is not the man to do it. He and the Atlas Network are committed to burning it all down because rules get in the way of profit, and anything that gets in the way of profit is anathema.

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#3216065 9-Apr-2024 12:15

johno1234:

elpenguino:

Well, when you put it that way, the sales pitch for neo-liberal economics was that companies would be free to compete to sell things to us.

The supermarkets and many other companies don't seem to be competing too hard.

Indeed. In fact they actively prevent competition by landbanking potential competitor sites or leasing them with clauses preventing supermarket use.

Like Napier's two Countdowns? "The supermarket chain has reaffirmed it has no plans to sell either of its two near-neighbouring operations." (Hawke's Bay Today) 21 Nov 2023. Coincidence almost a month after the election from the previous Government threatening to potentially force supermarkets to sell land banked property to open up competition.

MikeAqua

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#3216070 9-Apr-2024 12:40

There is long history in NZ of govts of various stripes, interfering in markets and almost universally making the outcomes for consumers in those markets worse. We are a small country with a number of market inefficiencies that are hard to correct.

I would like to be able to say that allowing many more working age immigrants into NZ would give us the critical mass to have more competition. However, govt regulations have contributed to the under-supply of housing in NZ as well ...

Mike

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#3216076 9-Apr-2024 12:50

MikeAqua:

There is long history in NZ of govts of various stripes, interfering in markets and almost universally making the outcomes for consumers in those markets worse. We are a small country with a number of market inefficiencies that are hard to correct.

I would like to be able to say that allowing many more working age immigrants into NZ would give us the critical mass to have more competition. However, govt regulations have contributed to the under-supply of housing in NZ as well ...

There is an equally long history of governments opting out of interfering by completely deregulating, almost universally making the outcomes for consumers in those markets worse. Balance.

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#3216079 9-Apr-2024 12:53

cddt:

These all pale in comparison with the monthly mortgage payment.

Australian banks take the entire nation's money and move it to Australia

MikeAqua

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#3216081 9-Apr-2024 13:02

Batman:

Australian banks take the entire nation's money and move it to Australia

Yup.

But there are alternatives (Kiwibank, cooperative banks etc). The risks may be higher though.

Mike

elpenguino

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#3216095 9-Apr-2024 13:47

MikeAqua:

There is long history in NZ of govts of various stripes, interfering in markets and almost universally making the outcomes for consumers in those markets worse. We are a small country with a number of market inefficiencies that are hard to correct.

I would like to be able to say that allowing many more working age immigrants into NZ would give us the critical mass to have more competition. However, govt regulations have contributed to the under-supply of housing in NZ as well ...

If you're going to describe regulation as 'interference' then we know who's side you're on, and that's the corporations.

Without regulation corporations would sell us poison and call it food. Oh wait .....

One of the causes of high housing cost is density. We need denser cities but nimbies push back on densification. Politicians go where the votes are, so in some ways we get what we deserve.

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#3216202 9-Apr-2024 14:17

MikeAqua:

Batman:

Australian banks take the entire nation's money and move it to Australia

Yup.

But there are alternatives (Kiwibank, cooperative banks etc). The risks may be higher though.

The likes of KB and the Co-Ops just don't have the infrastructure or the capital to be the country's bankers.
They'll always be "small" institutions by camparison to the global behemoths.

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wellygary

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#3216225 9-Apr-2024 15:06

elpenguino:

One of the causes of high housing cost is density. We need denser cities but nimbies push back on densification. Politicians go where the votes are, so in some ways we get what we deserve.

More housing supply can lower prices, but density/housing price is not a highly correlated metric

Case in point the below image of Vancouver in 1970s and 2014,

In 1977 the average house in Vancouver cost 90K, while an average household income in Canada was 24K,
Today a Vancouver home is worth $1.4 million, while household incomes are about 100K
All the new houses didn't keep prices in check-
The problem physical capital has inflated more than Human Capital...

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#3216249 9-Apr-2024 16:03

elpenguino:

One of the causes of high housing cost is density. We need denser cities but nimbies push back on densification.

Nope. The single biggest cause of high housing cost in N.Z. is high land cost. The cause of high land cost is failure to sub-divide. The cause of failure to subdivide is 1) Nimbies, 2) pseudo-environmentalism, 3) failure of the voter to understand supply vs demand.

Denser cities is the pseudo-environmentalists answer to a failure to subdivide. (n.b. The UK is not overpopulated, but has 11x the population on the same(ish) land area as N.Z.)

N.Z. has no rational excuse (only emotional excuses) not to reduce the cost of land by sub-dividing. If we don't feel like subdividing, the responsible action should be to stop growing the population.

elpenguino:

Politicians go where the votes are, so in some ways we get what we deserve.

Yes. That is correct.

tweake

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#3216269 9-Apr-2024 16:33

johno1234:

I think it is regulation not de-regulation that makes our building expensive. The classic example is the price of gib board and the lack of certified imported alternatives. It took until 2022 to finally allow some imported alternatives. Other examples are the compliance and permitting costs and zoning. If it was a free-for-all (not suggesting such a thing) then houses could be build for much less cost.

the problem with gib is the way its used and its hooks into the industry.

its a certified bracing member, which makes it easier to design a house using the gib as bracing. you can use other brands but not as bracing. you have to design and install separate bracing. designers and builders cannot be bothered doing that when its easier for them to just specify gib. what compounds this is council. designs with gib as bracing is normal and goes through quickly. designs with separate bracing are not and that takes longer to be approved by the council, which adds cost.

so part of the issue is the building industry is used to doing things one way and are happy for the customer to pay more for a product that makes their job easier.

tehgerbil

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#3216270 9-Apr-2024 16:33

johno1234:

Groucho:

Don't forget how Jenny Shipley's deregulation of the building industry made building a lot cheaper. How'd that work out 25 years later?

I think it is regulation not de-regulation that makes our building expensive. The classic example is the price of gib board and the lack of certified imported alternatives. It took until 2022 to finally allow some imported alternatives. Other examples are the compliance and permitting costs and zoning. If it was a free-for-all (not suggesting such a thing) then houses could be build for much less cost.

Very true. Council compliance departments are extremely buddy-buddy with Fletchers/building companies

They make the rules which specifically dictate the brand-names of products you need for having sign off.

Even if cheaper product XYZ is precisely the same ingredients/method of application without specific proof you used <fletchers monopoly brand> the Council will never sign off your build, you will never get insurance etc.

There are many benefits to this, but equally an insidious side of Fletchers being fully aware of this sweetheart agreement and milking it for all it's worth.

tripper1000

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#3216276 9-Apr-2024 16:37

tehgerbil:

Are we fortunate our Government is doing something at all?
Have the investigations resulted in better prices for kiwis?

Or were they a total whitewash and handwringing exercise designed to provide the appearance of the Govt doing something?

Yes - whitewash & hand-wringing. Primary intent was to placate, delay, scapegoat and move on.

The product of an investigation is data.

You assumed (as they wanted you to assume) that the outcome was going to be lower prices.

The high cost of petrol and groceries is not because of 'big' corporate profits.

The single biggest cost of petrol is tax - a direct result of the Govt. Petrol company profits were so poor, Shell exited the market. Anyone with 1/2 a brain knows that the next highest cost of petrol is due to the high cost of oil. The Govt blocked oil exploration in N.Z. contributing to (world-wide) demand exceeding supply and the corresponding rises. Wars in eastern Europe & M.E. don't help either.

Groceries. Yes, the headline profit figure seems really large, however as a percentage of turn-over, profit is comparatively small. Most of the money that comes into the till immediately goes out again to pay the wholesale costs. They are handling huge volumes of transactions and skimming just a little off every transaction (termed profit).

Energy. Energy costs are set to rise. The cost of electricity is N.Z. isn't as low as it could be, but is set to go higher. Te Whai Aluminium is presently paying 13% of your lines charges, so once they exit you WILL see a rise in lines charges. Pesudo-environmentalists are preventing growing the electricity system while we grow our population at a neck-breaking pace. The population of N.Z. has roughly doubled in the last 30 years (due immigration) but we haven't doubled the number of power-stations (nor have doubled the number of houses).

Kiwis are rubbish as strategic planning. That growing you population without growing the supply of supporting necessities causes price rises is entirely predictable.

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