This article from David Hargreaves on cheese prices got me thinking. He is saying that domestically produced food prices are too high.
At first I completely disagreed with, especially when he says things like:
There’s no doubt the excuse will come out about how much lower the Kiwi dollar is this year. And clearly that is a valid excuse when you talk about imported goods. But what about the goods produced at home?
This is a misnomer – as a lower exchange rate increases the return New Zealand exporters can get overseas, increasing the price New Zealander’s need to pay for a product.
However, there is another issue regarding the price of diary products in New Zealand that is important – and where the bleating about the price might make some sense: Collusion in the supermarket industry. If supermarkets are colluding on the price of diary products, the price would be higher than the socially optimal level. In this case there might be a competitive issue with supermarkets.
Do you think there is a competition issue – or do you think this is a whole lot of bleating about nothing?