Government's major supermarket shake-up will have positive impact on prices for consumers, Cameron Bagrie says

An independent economist says the Government's major supermarket shake-up will have a positive impact on grocery prices for consumers. 

The Government put supermarkets on notice on Monday, urging them to change at pace to increase competition and be prepared for regulation. 

It comes as part of the Government's response to the Commerce Commission's market study into New Zealand supermarkets, which found they earn $1 million a day in excess profits.

Independent economist Cameron Bagrie told AM the Government's announcement is "no magic bullet" that will see prices fall straight away. 

"Let's be blatantly clear, yesterday's announcement is no magic bullet, which is going to see supermarket prices falling rapidly over the next 6-12 months," he told AM co-host Melissa Chan-Green. 

"Supermarkets like a whole lot of other industries are facing rapidly rising costs and probably the best they can do in the current environment is to try and contain price increases."

But Bagrie said in the long-term it will have a positive impact on consumers. 

"Economics 101 is that yet more competitive prices, consumers are going to be the winners at the end of the day. The big story here is how long does that journey take before we get that more competitive pressure on the table," he told AM. 

"We know with Telecom it took an awfully long time but consumers have been the winner at the end of the day in regard to that. We are going to end up I think with a similar result in regards to supermarkets but it's just going to take a bit of time." 

Independent economist Cameron Bagrie.
Independent economist Cameron Bagrie. Photo credit: AM

 Bagrie told AM the Ministry of Business, Innovation and Employment (MBIE) has a big team but it doesn't have the right people to help make the changes required to the supermarket industry. 

"What we saw from the Government yesterday is the nuclear option is on the table and the ball is now in both the supermarket and MBIE court to chart a path to the future. This is a really important piece of work and they need to get some skilled people with private sector experience in there to try and navigate where we are going to be over the next 6-12 months," he said. 

"I'll give you an example of what goes on within the likes of MBIE. They have a big team of about 60 people that look after SMEs (Small and mid-size enterprises). The big issue for SMEs is access to credit. Does MBIE have anybody within that 60 person team that has experience actually working in that lending institution? The answer is no, they have a lot of policy people, so MBIE needs to gear up and get the right people in the right places to help navigate that piece of work because  it is a really important piece of work."      

Watch the full interview with Cameron Bagrie above.