There’s an old joke about economists walking past a $20 note on the sidewalk. One says to the other, “If that note were real, someone would have picked it up already.”
It could be that the $20 note was a photocopied counterfeit with advertising on the other side. You’ve probably seen those before.
But there are other potential explanations.
For example, imagine if you could collect that note by opening a new supermarket to compete with existing incumbents. You think there are decent profits to be had in grocery retail. That’s the $20 note – the profit you think could get, if you could open.
It could still turn out to be counterfeit. But if you’ve checked the sums and think it’s real, there’s only one way to find out.
You’d have to put in an application to council for a plan change because there just are not enough sites available zoned for large-footprint supermarkets. After a few years, if the plan change is approved, you’d be able to put in an application for a resource consent. If you’re from overseas, you will also need Overseas Investment Office approval.
You would have to do that for every single store. Every council would handle things differently.
Some councils will want you to prove that your new stores will not compete too much with existing supermarkets. It sounds utterly mad. But that is how our planning systems work. They often outright prohibit actual head-to-head competition.
The time and effort of going through that process, for every store you might want to open, could easily exceed the value of those $20 notes. And many councils would likely tell you no.
If that’s what’s going on, there could be genuine $20 notes on a lot of sidewalks – with nobody daring to check if any of them are real.
The government has considered retail grocery competition to be a matter of pressing national interest. So pressing that Minister for Economic Growth Nicola Willis has suggested breaking up existing supermarkets in various ways.
All break-up options are fraught and risk increasing costs to consumers rather than reducing them.
But if you thought enabling more competitive markets were a pressing national priority, wouldn’t it make more sense to make it simple and easy for a new entrant to try their luck?
Resource Management reform is coming and will hopefully solve the problem. But it will take years before new plans under that framework are operational. And the government is in a hurry.
Last week, my colleague Benno Blaschke provided a pathway that could work in the meantime.
The New Zealand Initiative released drafting notes for an omnibus bill. That kind of bill makes small modifications to lots of pieces of legislation. None of the existing fast-track consenting processes really work to enable grocery retail. But a few bits can be cobbled together into something rather workable.
Under our proposed Competitive Streamline Planning Process, anyone putting up at least ten new stores, or equivalent floor area, could seek approval through a fast track process.
The single process would both change district plans and consent the stores across multiple sites spanning different councils, while running overseas investment approval in parallel. A new entrant, or an existing smaller grocer, could get a decision within months for the full set of stores and associated warehouses.
Existing district plans have overarching rules that frustrate entry. They often worry about whether a new store might compete with a centre down the road. Decisions under our pathway would ignore those considerations. Plan changes to enable more supermarkets would be deemed to be consistent with the district plan’s requirements.
Every approved site could be mixed-use, rather than just retail grocery. If an entrant could make the development viable by putting apartments above the store, so much the better! They would be helping to solve the housing shortage while giving the store a natural set of customers. The panel deciding on the proposal could ignore plan provisions that would otherwise block that kind of development.
For five years, only new entrants or existing smaller retailers could use the fast-track. After that head start, the existing larger grocers could use it to bring more head-to-head competition. And when new district plans under a better planning system make the fast track redundant, a sunset clause ends it.
If the government wants to enable more competition in grocery retail, it needs to start by removing the regulatory barriers that prevent it. If the government views it as a priority, it could have legislation based on our drafting instructions by the end of the year.
I suspect any $20 notes on the sidewalks outside of the country’s supermarkets are counterfeit. But I could easily be wrong.
Why not make it legal and simple for new grocers to give it a go? We could all learn something from the process.
To read the full article on The Post website, click here.