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Are kiwis being over-charged for milk

Gordon Copeland Press Release
For Immediate Release
Monday, 17th March 2008

Are kiwis being over-charged for milk

Independent MP Gordon Copeland, the Kiwi Party’s spokesperson on commerce, today questioned whether New Zealanders are paying too much for milk.

“The dairy industry have consistently told New Zealanders that the recent dramatic increase in price is the result of international market conditions,” said Mr Copeland.

“It comes as a surprise therefore to discover that the current price for two litres of standard homogenised milk in New Zealand, at around $3.25, is actually higher than comparable prices in Australia, the USA, the United Kingdom, and Canada.”

“The price of milk should actually be significantly less here than in the countries to which New Zealand exports. Freight and insurance from New Zealand, the tariff payable at the border (the tariff into China for example is 10%) and internal freight within the importing country all have to be netted back to establish a comparable price in New Zealand.”

“In simple terms, the New Zealand price should be below comparable prices overseas, not above. On the face of it therefore, the fact that it is the other way around is grounds for an in depth examination if we are to be sure that the dairy industry is not overcharging the kiwi consumer.”

“Government should immediately ask the Commerce Commission for a full inquiry into this matter. I raised the issue with the Commission at the Commerce Select Committee last week and was advised that their main concern is to ensure that domestic competition for milk and other dairy products exists within New Zealand. However, that does not reassure me.”

“Fonterra dominates the New Zealand milk market and in those circumstances it is naïve to imagine that the smaller suppliers have a commercial incentive to lower their prices. In fact it is the other way around. It is in their financial interest to match the price established by the dominant player, since that will maximise profitability and farmer returns.”

“In those circumstances, kiwi consumers need to be assured someone is looking out for their interests. The price of butter and other dairy products could be looked at, at the same time.”

Price of two litres of milk

$NZ
New Zealand 3.25
Australia (average Sydney/Melbourne) 3.10
U.K (Sainsbury’s) 2.94
U.S.A 2.53
Canada (Vancouver) 2.36
France 3.43

Note: All prices have been converted back to New Zealand Dollars at exchange rates on 12 March 2008. Volumes have been standardised for two litres of milk. Full workings available on request.


ENDS

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