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Source: New Zealand Government

New Zealanders are not getting a fair deal on some key residential building supplies and while the Government has already driven improvements in the sector, a Commerce Commission review finds that  changes are needed to make it more competitive.

“New Zealand is facing the same global cost of living and inflation pressures as other countries and it is just not acceptable that such an important sector is not working as well as it could be,” Minister for Building and Construction Megan Woods and Minister of Commerce and Consumer Affairs David Clark said.

The Ministers were commenting after the release of the Commerce Commission’s draft report into the residential building supplies market.

“With good, affordable housing underpinning so many other social, economic and health outcomes, and given population growth and an increase in building consents over the last decade, it’s vital consumers get the best deal,” Megan Woods said.

“New Zealanders want to be able to build, renovate and repair their homes and we are committed to removing barriers to making that as affordable as possible,” Megan Woods said.

Key findings of the draft report include how concentrated the building supply market is, the relationship between suppliers and merchants, and the dominance of companies that make plasterboard and concrete.

As explicitly requested by the Government, the Commission looked at the regulatory system and how it works in practice, and its draft report points to opportunities for further examination.  

The Commission also found pricing of building supplies is not transparent and there is widespread use of rebates where merchants are incentivised to sell certain volumes of some products.

David Clark asked the Commerce Commission to undertake the market study because of long-standing concerns about potential competition issues and is pleased the draft report confirms there are issues that need to be addressed.

“As with the previous two market studies, on fuel pricing and supermarkets, today’s draft findings provide some thoughtful early analysis of what’s occurring in the building supplies sector. I encourage everyone to read the draft and make a submission, as this will help the Commission form its final report and recommendations. I look forward to the public discussion of these issues,” David Clark said.

“This report ties in very well with both the plasterboard taskforce work and the Building Consents Review currently underway to modernise the system by ensuring it is faster, more efficient and flexible. This is yet another step our Government has taken to fix the housing system so it’s fit for the 21st century,” Megan Woods said.  

“This draft study has uncovered a lot of useful information and we are looking forward to seeing the Commission’s final report in December,” Megan Woods said.

The building supplies market study delivers on a key Labour manifesto commitment.

For the draft report and information on how to make a submission, see the Commerce Commission’s website. Consultation on the draft report is open for four weeks and closes on Thursday, 1 September. The final report will be published by 6 December 2022.

Editor Notes

“This is the third market study undertaken by this Government which is committed to increasing market competition, limiting excess profit making, and ensuring Kiwis have more in their pockets

Studies on fuel markets and supermarkets have resulted in changes to open up competition on both those sectors so we know this is the right thing to do as continue to help with cost of living and inflation pressures.” Megan Woods said.

Legislation for the supermarkets sector passed in June gets rid of restrictive and exclusive covenants, that prevent competitors setting up stores, and a grocery sector regulator has been appointed.

“A draft code of conduct is also being consulted on, and changes to introduce compulsory unit pricing on groceries is underway,” David Clark said.