Businesses to save $90 million a year as Commerce Commission tackles interchange fees
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The Commerce Commission has issued its final decision today to reduce interchange fees paid by Kiwi businesses, saving them about $90 million a year in payment costs.
It costs New Zealand businesses about $1 billion a year to accept Visa and Mastercard payments, which is often passed on to customers through surcharges and higher product costs.
Today's decision builds on initial fee caps set in 2022, which led to $140m in annual savings for businesses.
The commission hasn't ruled out further regulation to curb excessive surcharging.
'This is an important step in our continued work to cut costs for businesses and consumers,' Commerce Commission chairman Dr John Small said.
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RNZ News
6 hours ago
- RNZ News
‘Competitive' Asian supermarket prices benefit consumers
Foodie offers a selection of products from China, Japan, Malaysia, the Philippines, Singapore, South Korea, Vietnam and other parts of Asia. Photo: RNZ / Yiting Lin Retail grocery store owners in Auckland are feeling the squeeze after stiff competition has tightened margins following the arrival of several large Asian supermarkets over the past 12 months. Described by the Commerce Commission as New Zealand's "largest one-stop Asian supermarket", Foodie opened in Westgate on 29 August 2024. The store spans 3800 square meters and offers a wide selection of products from China, Japan, Malaysia, the Philippines, Singapore, South Korea, Vietnam and other parts of Asia, catering to the city's growing Asian communities. Around the same time, Asian supermarket chain Tai Ping opened a new branch in Henderson on 24 August. LianHua launched its flagship supermarket store on Auckland's North Shore in November, which was followed by the opening of Medol in Mt Wellington in June. The recent surge in large Asian supermarket openings in Auckland has expanded options for consumers. At the same time, it has also intensified competition between operators, leaving some business owners feeling mounting pressures to stay profitable. Golden Apple's core customer base is predominantly Asian. Photo: Supplied Golden Apple, which opened its first grocery outlet in Henderson in 2015 followed by a second on the North Shore in 2023, is among those feeling the pinch. William Zhong, manager of Golden Apple, said sales at the Henderson location had fallen sharply since the opening of Foodie and Tai Ping's new stores in the same suburb. "My business really struggled from the end of last year through the beginning of this year," he said. Zhong said Golden Apple's core customer base is predominantly Asian, with Chinese shoppers making up the majority. He said the store's North Shore location is performing much better than the Henderson branch, largely due to demographics. "About 60 percent to 70 percent of our customers on the North Shore are Chinese," he said. "Whereas in Henderson, it's only around 40 percent." Golden Apple's Henderson store. Photo: Supplied Zhong said although Auckland's Chinese population was growing rapidly, the number of Asian supermarkets was expanding at an even faster pace. He said customers generally preferred to shop close to home, which meant that an oversupply of Asian supermarkets in a single suburb could exceed demand, making it difficult for businesses to remain profitable. "Right now, many of Auckland's best Asian supermarkets are concentrated in West Auckland, particularly in Henderson and Westgate," he said. Four large Asian supermarkets in the area - Foodie, Tai Ping, Golden Apple and SMART - were located a few kilometers from each other, he said. "We all feel the pressure," he said. "The market is not big, but there are more and more Asian supermarkets opening here." Zhong said the economic downturn in many sectors in New Zealand had prompted many Chinese investors to enter the grocery business, believing supermarkets were the best place to make money - especially given their strong performance and status as essential businesses that were allowed to operate during the COVID-19 lockdowns. He believed this trend helped to accelerate the boom in Asian supermarkets across Auckland. Asian supermarket chain Tai Ping opened a new branch in Henderson in August 2024. Photo: RNZ / Ruth Kuo Zhong said his focus now was on continuing to provide high-quality products and excellent service to his core customer base, and he was pleased that many customers who had stopped shopping at Golden Apple's Henderson store were gradually returning. He said competition among Asian supermarkets in Auckland was likely to intensify over the next few years, potentially leading to a shake-up in the market. "Some supermarkets will survive," he said. "But those that can't will eventually have to close their doors." Chengde Liu, owner of E-PACS Supermart, admitted to feeling the same pressure. After immigrating from Singapore to New Zealand in the 1980s, Liu opened E-PACS in the Auckland suburb of East Tāmaki in 2000, specializing in offering vegetarian and Malaysian/Singaporean food for the migrant community. Liu said the number of Asian supermarkets and grocery stores in Auckland at the time could be counted on one hand. E-PACS Supermart has been operating in Auckland for more than two decades. Photo: RNZ / Ruth Kuo Tai Ping, Lim Chhour, Soung Yueen and Tofu Shop were among a handful of places where migrants regularly went to buy food that contained the flavour of home and maintain ties to their cultural roots. He said the growing number of Asian migrants had contributed directly to the expansion of the grocery sector in Auckland. Liu's strategy was to stand out by offering a specialized range of products aimed at targeted customers. "Eighty percent of our products are vegetarian foods," he said. "This is our strength, and the core advantage that allows us to survive." In addition to serving Malaysian and Singaporean foods, Liu said the store had expanded its offerings to include products from Thailand, the Philippines, Indonesia, Vietnam and Taiwan in an effort to attract customers from different backgrounds. The management team at Foodie does not want to compete directly with other Asian supermarkets. Photo: RNZ / Yiting Lin Tao Shi, managing director of Foodie, said weekday foot traffic had remained steady at around 2000 to 3000 customers since opening. Foot traffic typically doubled on weekends. Shi said Foodie's gross turnover dipped for about three weeks from late November to early December - a period before Christmas he described as a typical "quiet season" for the grocery sector. "Sales dropped around 10 to 20 percent during those three weeks," he said. "That was really stressful for us." However, he said sales had bounced back this year and performed well in the last quarter. "The gross turnover in the June quarter increased 15 percent compared with the March quarter," he said. Foot traffic at Foodie typically doubles over weekends. Photo: RNZ / Lin Yiting Shi said Foodie did not aim to compete directly with other Asian supermarkets, adding it offered a unique shopping experience that allowed customers the opportunity to purchase daily essentials at one location instead of visiting multiple stores. He believed all Asian supermarkets share the same goal of expanding and growing their customer base. "I don't think it's competition," he said. "We [Asian supermarkets] can work together to make ourselves more mainstream. "We should advocate for attracting more non-Asian customers to shop [in Asian supermarkets]. We are not here to serve only Asian customers." After a year in operation, Shi said most of Foodie's customers remained Asian, particularly those from Chinese, South Korean, Filipino and Indian communities. During public and school holidays, however, non-Asian shoppers made up nearly half of the store's foot traffic. Shi said market demand was driving the rapid growth of Asian supermarkets in Auckland, adding options for shoppers, including more competitive food prices. "Some products do have competitive prices," he said. "We get fresh produce directly from farms, so we can keep prices a little lower for customers." Shi said Foodie is planning to open at least three to five new branches in Auckland, and potentially outside the city. "We do have the ambition to build Foodie as a national brand," he said. "That's our long-term goal. "But it's still too early to say. After all, we have only one store now, so we will take it one step at a time and serve every customer well." Asian supermarket chain Tai Ping opened a new branch in Henderson in August 2024. Photo: RNZ / Ruth Kuo Stats NZ's latest data shows that retail sales value for supermarkets and grocery stores stood at $26.31 billion in 2023, rising to $27.08 billion in 2024. Meanwhile, food prices increased 4.6 percent in the 12 months to 30 June, following a 4.4 percent rise in the year to 31 May. The Commerce Commission's 2024 Annual Grocery Report, released on 6 August, said Auckland's major supermarkets held 71 percent of the market, compared with 88 percent in the rest of the country. The report said barriers to entry for new competitors remained high, and the major supermarkets continued to wield significant power over smaller suppliers. While consumers in Auckland and other major cities have a range of options, those in smaller towns and rural areas often have little to no choice, with some stores in small towns operating as local monopolies. "Auckland continues to be a hub for the entry and expansion of specialist grocery retailers," a Commerce Commission spokesperson said. "Major supermarkets have a significantly lower market share in Auckland compared with other regions, partly due to the presence of more specialist grocery retailers, like Asian stores," the spokesperson said. "This is driving higher levels of competition and choice that benefit consumers and is something we would like to see across the country."
Scoop
8 hours ago
- Scoop
The Pieces Have Fallen Into Place. Lower Rates Are Needed
Press Release – Kiwi Economics At first glance, the June jobs report looked a bit better than expected. But under the microscope, the Kiwi labour market is clearly soft. The unemployment rate came in at 5.2%, slightly below our forecast of 5.3%. The stars, or shall we say data, have aligned for a rate cut by the RBNZ next week. We've now had all the key data releases in the lead up to the Reserve Bank's upcoming meeting. And all of them have supported the case for lower rates. Adding to an already tall pile of evidence that our economy needs stimulus, was the June quarter Kiwi jobs report. Unemployment lifted to a five-year high. And it would have been higher if not for the steeper-than-expected slide in the participation rate. Meanwhile, details under the headline rate portray an even weaker reality. Inflation expectations remain comfortably within the RBNZ's 1-3% target band. The RBNZ should feel comfortable looking through this near-term rise in inflation. See our COTW for more. Here's our take on current events Since the RBNZ paused in July there were three key data releases we knew would be carefully picked apart before the August meeting. The first was June quarter Kiwi inflation, which showed weak underlying price pressures, despite a lift in the headline rate to 2.7%. Then last week, we saw the remaining two key data prints: the Kiwi labour market report and the RBNZ's survey of inflation expectations. Both of which support the case for further rate cuts. A 25bps cut next week to 3%, followed by an eventual move to 2.5%. At first glance, the June jobs report looked a bit better than expected. But under the microscope, the Kiwi labour market is clearly soft. The unemployment rate came in at 5.2%, slightly below our forecast of 5.3%. But it's the deeper slide in labour force participation that kept a lid on the unemployment rate. From (a downwardly revised) 70.7% to 70.5%, the participation rate has dropped to a four-year low. That in itself is a sign of a weak labour market. People are leaving the labour market because it is simply not as attractive as it once was. In fact, the labour force shrank over the year. That doesn't happen often. The 0.4% decline is the deepest since March 2013. Labour demand is soft. The June quarter recorded a 0.1% decline in employment. And the 0.1% gain in the March quarter was revised to flat. On an annual basis, employment growth is running at the weakest rates since the GFC. The underutilisation rate – a broader measure of untapped labour market capacity – rose to 12.8%, the highest since September 2020. There's clearly significant slack within the Kiwi labour market. Hours worked fell 1% over the quarter, marking the sixth straight quarterly decline. That's a concern for how June quarter GDP might unfold. High frequency economic indicators have already been flagging a marked slowdown, potentially a contraction, in activity. This statistic adds to the list. Declining hours is being met with easing wage pressures. More and more workers are receiving smaller and smaller pay rises. For example, the number of workers receiving a pay rise above 2% but below 3% has been steadily increasing for the last two years. And the wage bill (private sector Labour Cost Index) rose 2.3% over the year – the lowest in four years. That's quite the drop from the 4.5% peak. That's indicative of a weak economy. Overall, the labour market is weaker than the RBNZ had expected back in May. The unemployment rate may have been in line with their forecast, but only because of the drop in the participation rate. Labour demand is clearly weaker than the 0.2% gain the RBNZ had forecast in May. Alongside contained and anchored inflation expectations (see COTW), the door remains open for a 25bps rate cut later this month. And the cash rate will need to go to 2.5%, eventually. Chart of the Week: Inflation expectations holding steady as she goes Inflation expectations tend to follow actual inflation. So when we saw the headline rate accelerate from 2.5% to 2.7% over the June quarter, it was almost a given that we'd see a lift across inflation expectations. That wouldn't have gone down too well at the RBNZ. Remember the 5-1vote at the May MPS? The argument to hold rates was grounded in concerns around rising inflation expectations. Thankfully, the latest round of the RBNZ's survey of inflation expectations showed expectations comfortably contained within the RBNZ's 1-3% target band. In fact, inflation expectations for 1-year ahead dropped 4bps to 2.37%. The 2-year ahead measure – key horizon to consider for setting monetary policy – also dropped by 1bp to 2.28%. We like to see that. And we're sure the RBNZ was pleased with the move lower too. Especially in the face of the temporary inflation spike we're seeing right now. Further out, there was a bit more movement in the 5-year ahead measure, up 8bps to 2.26%. While the 10-year ahead measure remain unchanged at 2.15%. On balance, all measures remain comfortably within the RBNZ's target band. It confirms that there remains little risk this bout of high inflation will persist. As we've seen in NZIER's Quarterly Survey of Business Opinion, firm's pricing power is evaporating. And spare capacity in our deteriorating labour market is another disinflationary force. The bigger risk continues to be inflation undershooting the 2% midpoint over the medium term. Hence our call for a lower more stimulatory 2.5% cash rate.
Scoop
9 hours ago
- Scoop
The Pieces Have Fallen Into Place. Lower Rates Are Needed
The stars, or shall we say data, have aligned for a rate cut by the RBNZ next week. We've now had all the key data releases in the lead up to the Reserve Bank's upcoming meeting. And all of them have supported the case for lower rates. Adding to an already tall pile of evidence that our economy needs stimulus, was the June quarter Kiwi jobs report. Unemployment lifted to a five-year high. And it would have been higher if not for the steeper-than-expected slide in the participation rate. Meanwhile, details under the headline rate portray an even weaker reality. Inflation expectations remain comfortably within the RBNZ's 1-3% target band. The RBNZ should feel comfortable looking through this near-term rise in inflation. See our COTW for more. Here's our take on current events Since the RBNZ paused in July there were three key data releases we knew would be carefully picked apart before the August meeting. The first was June quarter Kiwi inflation, which showed weak underlying price pressures, despite a lift in the headline rate to 2.7%. Then last week, we saw the remaining two key data prints: the Kiwi labour market report and the RBNZ's survey of inflation expectations. Both of which support the case for further rate cuts. A 25bps cut next week to 3%, followed by an eventual move to 2.5%. At first glance, the June jobs report looked a bit better than expected. But under the microscope, the Kiwi labour market is clearly soft. The unemployment rate came in at 5.2%, slightly below our forecast of 5.3%. But it's the deeper slide in labour force participation that kept a lid on the unemployment rate. From (a downwardly revised) 70.7% to 70.5%, the participation rate has dropped to a four-year low. That in itself is a sign of a weak labour market. People are leaving the labour market because it is simply not as attractive as it once was. In fact, the labour force shrank over the year. That doesn't happen often. The 0.4% decline is the deepest since March 2013. Labour demand is soft. The June quarter recorded a 0.1% decline in employment. And the 0.1% gain in the March quarter was revised to flat. On an annual basis, employment growth is running at the weakest rates since the GFC. The underutilisation rate – a broader measure of untapped labour market capacity – rose to 12.8%, the highest since September 2020. There's clearly significant slack within the Kiwi labour market. Hours worked fell 1% over the quarter, marking the sixth straight quarterly decline. That's a concern for how June quarter GDP might unfold. High frequency economic indicators have already been flagging a marked slowdown, potentially a contraction, in activity. This statistic adds to the list. Declining hours is being met with easing wage pressures. More and more workers are receiving smaller and smaller pay rises. For example, the number of workers receiving a pay rise above 2% but below 3% has been steadily increasing for the last two years. And the wage bill (private sector Labour Cost Index) rose 2.3% over the year – the lowest in four years. That's quite the drop from the 4.5% peak. That's indicative of a weak economy. Overall, the labour market is weaker than the RBNZ had expected back in May. The unemployment rate may have been in line with their forecast, but only because of the drop in the participation rate. Labour demand is clearly weaker than the 0.2% gain the RBNZ had forecast in May. Alongside contained and anchored inflation expectations (see COTW), the door remains open for a 25bps rate cut later this month. And the cash rate will need to go to 2.5%, eventually. Chart of the Week: Inflation expectations holding steady as she goes Inflation expectations tend to follow actual inflation. So when we saw the headline rate accelerate from 2.5% to 2.7% over the June quarter, it was almost a given that we'd see a lift across inflation expectations. That wouldn't have gone down too well at the RBNZ. Remember the 5-1vote at the May MPS? The argument to hold rates was grounded in concerns around rising inflation expectations. Thankfully, the latest round of the RBNZ's survey of inflation expectations showed expectations comfortably contained within the RBNZ's 1-3% target band. In fact, inflation expectations for 1-year ahead dropped 4bps to 2.37%. The 2-year ahead measure – key horizon to consider for setting monetary policy – also dropped by 1bp to 2.28%. We like to see that. And we're sure the RBNZ was pleased with the move lower too. Especially in the face of the temporary inflation spike we're seeing right now. Further out, there was a bit more movement in the 5-year ahead measure, up 8bps to 2.26%. While the 10-year ahead measure remain unchanged at 2.15%. On balance, all measures remain comfortably within the RBNZ's target band. It confirms that there remains little risk this bout of high inflation will persist. As we've seen in NZIER's Quarterly Survey of Business Opinion, firm's pricing power is evaporating. And spare capacity in our deteriorating labour market is another disinflationary force. The bigger risk continues to be inflation undershooting the 2% midpoint over the medium term. Hence our call for a lower more stimulatory 2.5% cash rate.
