Explaining the high prices of goods and services in NZ

New productivity research: Explaining the high prices of goods and services in New Zealand

The Productivity Commission commissioned Professor Norman Gemmell, the Victoria University of Wellington Chair in Public Finance, to compare consumer prices in New Zealand with those overseas and to explain any differences identified.

The report has now been released: Explaining international differences in the prices of tradables and non-tradables (with a New Zealand perspective)

• This report follows the one published in March: The prices of goods and services in New Zealand: An international comparison
• Also available are an infographic and 4-page summary (of both reports)
• Short link for any tweets: http://bit.ly/nzpri

Professor Gemmell is giving a public lecture today at VUW at 4pm.

Using World Bank data, Professor Gemmell shows that prices are relatively high in New Zealand compared to other countries. This is true for goods and services which face no direct foreign competition (non-tradables) and for those that are traded internationally or in competition with foreign goods (tradables).

It is impossible to say whether relative consumer prices are “too high” without also understanding what is driving these prices, as they may, for example, reflect intrinsic costs of production in New Zealand. However, they may also reflect a problem in our markets, such as a lack of competition or access to international markets in key areas. The report highlights that where prices are high this may be due to a high cost of capital, small population and low levels of skilled labour per capita. It also shows that high non-tradables prices and market access issues (including transport costs) lead to higher prices of tradables.

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