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Wednesday, August 17, 2011

The pricing of petrol and milk in NZ

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I took the opportunity today to pen my opinion on the NZ price of milk and petrol. There is currently an inquiry underway into the price of milk.

Milk strikes me as an important source of protein and calcium in the diet of many families. Toast and cereal strike me as very simple meals that given low-income parents and their children some consistency about their meals. Its not rocket science to make it.
The reason prices for milk and other agricultural commodities is high because of the inadequate provisions made by Asia to address food security issues. This might also be considered a shortcoming for low-income NZ'ers, if that was the only issue they had to contend with. If I look at one country in Asia where I spend a lot of time - the Philippines. Agriculture had little appeal because prices were low, land often divided between family members, and city jobs offer so much more appeal. If these attitudes persist, Asians will be drinking a lot more milk. This is not such a problem for high-intensity market gardening. But it spells high prices for milk, and Fonterra should of course be able to sell milk abroad at 'market price', without having to sell subsidised milk locally.
But I wonder - why does 'healthy' low-fat milk sell at such a premium when the 'animal or butter fat' content is removed for higher value cheese production. It ought to be cheaper, despite the added production cost. Why am I paying so much for mostly water.
I think there needs to be reform to market regulation. If you are going to function as an 'effective monopoly', your product ought to be priced at a 'regulated cost + fixed profit premium', but as soon as you or the industry achieve a 'distributed' production regime, the competition ought to be on.

I am curious. Why are petrol prices $2.02/litre when the NZD is at record highs (up from $1.69 a year ago), the international oil price is $0.85/barrel, well down from $1.40/bbl. I know refining costs are fixed, but this is a huge disparity.


'Buying NZ Property – Download the free sample readings!

NZ presents some of the most alluring property in the Western World; particularly given the greater easy of residency, the low cost of property, and the liveability of the country. In addition, there is no capital gains tax, transfer taxes, VAT/GST or wealth taxes in NZ, so rest assured that NZ property is tax-effective! Learn more now!

New Zealand Property Report 2010 - Download the table of contents or buy this 180-page report at our online store for just $US19.95.


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