Matt Nolan

Are supermarkets too uncompetitive for Warehouse Extra?

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So the High Courts documents on the Warehouse merger ruling have been released. After skimming a couple of things I thought I would say something, then when I’ve actually read the document I can join in the criticism of it 🙂

It seems that the High Court overturned the Commerce Commissions decision as it felt that the Warehouse Extra concept would fail. As it would fail, it doesn’t matter whether one of the supermarkets purchases the company. Ok, thats cool, however they also go off and accept that there is probably tacit collusion between the two supermarket owners, Woolworths Ltd and Foodstuffs.

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Matt Nolan

Fat tax?

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Following the discuss on lower GST for healthy foods I feel it is appropriate to discuss the other side of the coin, a tax on inherently unhealthy food, a fat tax.

You know the type of foods I’m talking about, chocolate bars, chips, V’s (I can see all this on my desk, looks like this tax will hit me pretty hard 🙂 ). If there is a social cost to the consumption of these types of goods we should tax them, and send the funds to the place where the externality will fall.

In this case, drinking too much V will lead to me needing to use health services more than I would have with no V. In order to ensure a socially efficient outcome, V needs to be taxed, and the money needs to be sent to the hospital. This will lead to me reducing my consumption of V (not likely) or paying the value of the negative externality I impose on society (my health care bill) or a mix.

Now this tax is on the consumption decisions of people, so the level of the tax will depend on how much we believe the consumption of V’s adds to the cost of running health care in NZ (or any other externalities it may cause). If we are so keen on taxing smoking, fuel, and alcohol, then why aren’t we taxing Moro bars and V’s?

Update:  Here is an article that goes into (marginally) more detail about a fat tax.

Matt Nolan

Cut GST for fruit and veg?

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Over at Kiwiblog, Mr Farrar noticed a newspaper article on removing the GST tax from fruit and veg. I agree with him on both his points,

1) that the response of consumers to a 12.5% reduction in the price of fruit and veg will likely be small (items that only take up a small part of your household budget are inherently price-inelastic), and

2) that it is better to have a flat GST rate, as you are ensuring that the relative price of goods remains the same and minimise the cost of implementing the policy

However, the Massey Researchers also have a point (there is something I never thought I’d say 🙂 ), and it has to do with situations where the second point doesn’t hold, specifically when we don’t want the relative price of the goods to stay the same. This occurs if we have an externality.

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Matt Nolan

The Warehouse sale and Integrity

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So we won’t know whether the Warehouse is going to be sold until the High Court releases the details surrounding its ruling and the Commerce Commission decides whether to appeal.  Ultimately I hope the decision to allow a sale had something to do with the halo effect ;).

Something that did catch my eye is Steven Tindall’s claim that he will act with integrity when selling his shares.  For the life of me I don’t know what the hell he’s talking about.  My guess is that he is going to pretend to sell to the the bidder who offers to keep the community spirit of the Warehouse going.  Although to be fair to the man, he is strongly involved in charity, and I’m sure he’ll keep a stake in the company he spent so long creating.

Can anyone tell me what they think Mr Tindell’s integrity will involve, and do you think this ‘integrity’ will have a price?

Matt Nolan

Monetary policy statement preview – December 6 2007

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The last 6 weeks have shown the New Zealand economy to be tight – but not to tight. Unemployment has fallen to a record low (3.5%), but at the same time the participation rate has fallen and employment growth has fallen to its lowest rate in a few years. Income growth was strong, but not out of control.

The QSBO indicated that capacity utilisation is still high, but not as high as it has been. Consumption imports are rising, but merchant stocks are high and retail sales growth is moderate at best, although off a high level.

House price growth is strong, but slowing. House sales are falling, but the average number of days to sell property remain short, implying that there is little pressure on highly leveraged home owners to sell property.

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Matt Nolan

Rule following and bus drivers

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Today on the bus the bus driver stopped to tell school kids to stand up. This happens on occasion, and generally the adults on the bus act like they think it is a complete joke. You can here comments like ‘this is ridiculous’ and ‘the bus driver just wants to feel important’ from adults/civil servants lounging around, but ultimately I think the bus drivers understand what is going on better than the group of civil servants on the bus.

Bus drivers are like the government, they are given a certain welfare policy that has to be followed on their bus. Although conditions such as standing up to let frail older people sit down are solved internally in the ‘marketplace’ of the bus, the condition of having all adults sitting while children stand is often violated. Now don’t get me wrong, I’m not saying that the rule is right, ultimately in social welfare terms I think there is no difference between me standing or some 14 year old boy is standing, but this is the rule that the bus driver has to enforce.

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