The only reason the Government has not come up with a simple and effective solution to present wrangles over domestic milk prices is its obsession with free market ideology. The solution is staring them in the face – government should fix the wholesale domestic milk price by regulation.
Such action makes perfect sense because Fonterra enjoys its virtual monopoly position in the milk market by virtue of legislation, so it makes sense that anomalies created by that situation should also be addressed by legislation. In a fair and consultative process, both consumer representatives and Fonterra will get a fair chance to lobby for the best price for their respective interest groups.
Fonterra will, of course, argue for a price as close as possible to the international milk price, so as not to suffer theoretical losses by supplying local markets. Consumer bodies will lobby for the lowest possible price so that the worst-off groups can afford access to one of the bounties of New Zealand life.
And Government will consider prices in respect of the long-term support dairying has had from publicly funded trade representation in all of its principal international markets for almost 150 years.
So in place of a commercial milk market such as the Right are always banging on about, and which even the Commerce Commission has acknowledged does not exist here, we have a market of influence, well salted with the political reality of public opinion.
Indeed, if Fonterra had not treated public opinion with such cavalier disregard over recent years, they might not be in a position where the Government feel obliged to get involved in domestic dairying at all. Instead of Fonterra yelping to the media about how unfair the current situation is, they should take a long, hard look at its own highly paid public relations executives, and ask whether its recent performance has been up to scratch.
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Hi
There is an obsession with looking at one side of this equation – the price of milk. But to determine the affordablity we have to look at both teh price of milk and the level of income.
Meanwhile we have a brain drain to places with higher wages, housing prices are less affordable in NZ then almost anywhere else, cost of living is high, people complain about high tax (despite our low tax rates), etc, etc.
We could fix this in one stroke; bring our wages up to market rates. (Market rates being in international terms in this context).
Not only would this fix the price of milk situation but would also be great for stimulating demand for NZ businesses as desposable income increases.
After all 74% of NZers get all or most of their income from wages or salaries so driving down wages both makes milk unaffordable if priced on the international market and deprives wage earners of disposable income. Which is to say deprives business of sales income.