New Zealand should foster productivity growth with policy reforms that support competition in the banking and electricity sectors, the Organisation for Economic Co-operation and Development (OECD) says.
Its latest Economic Outlook Report said growth in NZ “remains feeble” and cuts to interest rates and taxes would support only a “modest recovery”. The OECD expects growth to be just 1.4% in 2025 and 2.1% the following year, below the Reserve Bank’s estimate of 2.4%.
“Insufficient supply of high-skilled labour, tapering of the post-pandemic rebound in international tourist arrivals and low productivity growth will temper the recovery,” it said.
Lower interest rates and planning reform might mean the housing and infrastructure sectors drive a faster recovery, but there are other risks and headwinds as well.
“If electricity futures prices remain high, or rise further, this would cause more firm closures and undermine business investment” and slow future growth.
The OECD said reviews of the electricity sector should look closely at splitting the generation and retail operations of large companies, often called gentailers, as a way to improve competition and provide the industry with better hedging options.
“High futures electricity prices for industry will exacerbate productivity problems by weakening business investment, especially in the green and digital transitions, as electricity is a core input for both,” it said in the report.
Margaret Cooney, the chief operating officer of electricity retailer Octopus Energy, said there was a growing consensus that something needed to be done about the energy sector.
“The current settings mean gentailers are able to manage their pricing between their generation and retail arms, often selling energy to themselves for less than they sell to independent retailers,” she said in a press release.
“New Zealanders are currently facing another year of significant electricity prices and power shortages. The Government needs to act on the recommendations of international experts and make sure the electricity market delivers for New Zealand”.
Last month, Energy Ministers Simeon Brown and Shane Jones announced a review of the electricity market which will assess whether it was “fit for purpose”.
It will consider whether ownership and integration of generation and retail has affected competition, although the terms of reference are broad.
The Electricity Authority and Commerce Commission have also set up a task force to investigate ways to improve the performance of the electricity market.
That review will consider non-discrimination rules which would not split up integrated businesses but would force them to sell energy to external retailers on the same terms they offer internally.
31 Comments
The rentiers have been allowed to nibble away at productive incomes for far too long, claiming slightly bigger shares gradually.
We are probably at a point where the parasites can no longer grow or sustain themselves without killing off the host.
But let's waste all our fiscal and industry effort towards achieving lower interest rates. That will make up for everything! [sarc]
Yes 33 cent/watt for the panel. Or 199 cents per watt for a kit with 10kWh battery.
https://tradedepot.co.nz/lighting-electrical-and-plumbing/solar/
I keep saying it, with the rising costs of power and competition ramping up for solar plus tradies losing out on work in some areas, the ROI will be much lower than expected. It's still a gamble, but my bet is that power prices are only going to go up over time as we add more and more people adding demand, and hence it will pay itself back much sooner. Batteries are still a little pricey but again, depending on how much you use at night and if you crank the AC in the summer frequently, it can be worthwhile.
Also 0 incentive for the govt apart from popularity. They are a 51% shareholder in many of the gentailers. So they would lose out on profit and tax as a double whammy leaving them to find the money elsewhere and I'd bank on it being via tax, once again lumping more onto the younger generations across their lifetimes. Quite the conundrum
Another task force and review. There must still be a few filed away from the last ones.
How much of this is due to selling off of the electricity companies, and the creative accounting involved at the time?
How much to do with the increased demand from technology?
How much because we haven't really encouraged the uptake of household solar?
We know market economics is primarily to increase demand at a higher rate than supply. Minimising supply as far as one can get away with is great for profit.
Just like the OECD's tax recommendations, this will go nowhere.
Government likes the revenue it receives from their 1/2 share ownership of the big gentailers and wants to keep it so they keep taxes 'lower'. But in effect, it simply acts like GST - another regressive tax - with the bulk of us funding government indirectly with the top 5% making out like bandits ... yet again.
edit: And I should add that as electricity prices increase, government's GST take goes up too. Conned? We sure are. But spare a thought for the Yanks. Most of them believe Trump's tariffs will be paid by someone else ... In actual fact they're a tax each Yank will end up paying.
Why don't these OECD wallahs address their concerns directly to the Government because, hey every one, the government owns a majority shareholding in three of the largest power companies in New Zealand. They could simply reduce the cost of power tomorrow and, to remain competitive, all the other power companies like Contact Energy would have to follow suit. Simple as...
Mind you, all the Kiwi Saver fund managers would be beside themselves because for the government to do this would be the last straw for many funds. With disasters like Fletchers and Spark constituting a large part of the NZX there would be very little else to invest in, in NZ at least, if the power companies were hollowed out.
Besides, if the larger power companies were segmented and the segments sold off, the many smaller companies created together with those already in existence wouldn't have the economies of scale to materially reduce power prices or to finance the development of new green power generation which NZ badly needs.
"Mind you, all the Kiwi Saver fund managers would be beside themselves because for the government to do this would be the last straw for many funds. With disasters like Fletchers and Spark constituting a large part of the NZX there would be very little else to invest in, in NZ at least, if the power companies were hollowed out."
The bulk of Kiwisaver funds are invested offshore in any case. We can always invest directly without the NZX....i doubt many would miss it if it disappeared.
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