One of the country’s biggest supermarket chains, Countdown, has announced plans to temporarily freeze retail prices on 500 retail items for the duration of winter. They have assured that the freeze will hold no matter the changes to inflation rates during this period. This move, it has been said, is a result of the cost of living crisis that consumers are suffering. The freeze is intended to take effect from May 9th until the end of winter.
Parent company Woolworths CEO has commented that supermarkets were not responsible for rising prices. Countdown’s commercial director, Steve Mills, added that they were faced with increased costs related to such factors as transport, fuel, labour, and raw commodities. This included a 640% increase in shipping rates and a 30% increase in fuel costs. He noted that on average they had seen price increases of up to 9% from suppliers and had to effect about 1,000 increases over the last 10 months.
However, a Commerce Commission report indicates that there is a lack of competition in the New Zealand grocery market and that commodity prices are higher than international standards. It also highlighted the fact that two main retailers had made about $430 million in excess profits each year.
Woolworths NZ MD, Spencer Sonn, has attributed the price increases to supply chain challenges that saw retailers unable to bring in a sufficient supply of consumer products during the pandemic and the related cost increases. He denies that supermarkets are to blame for the rising prices, noting that inflation was a problem being experienced by all sectors and having a direct impact on the cost of living.
He emphasized that inflation continued to be impacted by the events of the pandemic, the global monetary and fiscal response, and even the ongoing war in Ukraine. Sonn pointed to his company’s efforts to keep prices as low as possible and voiced his support for greater competition in the grocery sector of New Zealand.
Principal economist at Infometrics, Brad Olsen, had earlier last month predicted that retailers would be hiking prices as a result of rising inflation and disruptions caused by the pandemic. He expressed concern that the momentum in price increases was not likely to decline going forward causing further strain on the cost of living and forcing households to pay keen attention to their budgets.
Olsen said that low- and middle-income households would be the hardest hit and likely compel the government to offer further support. He also noted that the Reserve Bank bore some responsibility in controlling inflation but had been failing. He added that it was possible the government did not fully understand the pressures the retail sector was suffering.
Contact Accountancy Insurance
We would love to hear from you.
About Accountancy Insurance:
Thousands of accounting firms offer our tax audit insurance solution, Audit Shield to their clients. Find out why.