Matt Nolan

$12 minimum wage

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Following on from our post on the minimum wage yesterday, the government decided to announce an increase in the minimum wage to $12, from $11.25.

The money-quote from the stuff story has to be:

“Initially business groups were opposed to lifting the minimum wage, which was set at $7 an hour when Labour took office in 1999.

However, in recent years they became more relaxed as the labour market tightened and hiring staff became more difficult.”

This tells us that the minimum wage increases are unbinding for a lot more groups than they used to be, and as a result the effect of the policy will be minimal.

Lets try to discuss this increase in regards to yesterdays conditions for a minimum wage to ‘increase’ employment.

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Matt Nolan

December 07 MPS – OCR unchanged at 8.25%

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The December quarter monetary policy statement was released today. Alongside this they announced that the OCR would remain unchanged, as they believe “current level of the OCR remains consistent with future inflation outcomes of 1 to 3 percent on average over the medium term”. This times they give the feeling that tax cuts are incorporated in their view of inflation outcomes, however they still view the emissions trading scheme and financial market uncertainty as risks to their forecasts.

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Will Taylor

Thoughts on the Warehouse Decision

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I found this point particularly interesting

“it is not possible to conclude that the relevant markets would be more competitive if the Warehouse Extra concept is pursued by the acquirer than if the Warehouse is not acquired”

I have always been of the opinion that the Extra concept would be much more effective in the hands of Woolworths or Foodstuffs due to the massive scale they have in the wholesale market. One of the supermarkets could then use the “halo” effect to the benefit of their grocery operations. I think this would lead to more competition than the status quo.

Another really interesting point is that the high court ditched the 5% price effect threshold in favor of 2% and still found that the acquisition wouldn’t substantially lessen competition. While this is interesting in it self, it also has profound implications for future mergers as the commission will have leeway to use different thresholds depending on the situation now that there is high court precedence for doing so

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

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?