Paying less for Aussie products in NZ

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They've long been considered our little cousin across "the Ditch", but New Zealanders are having the last laugh when it comes to Australian made groceries.

Auckland has a population of about one and a half million, hardly a massive grocery market when compared to Sydney, Melbourne or Brisbane, but for some reason, this city enjoys a shopping bonanza we can only dream about.

Craig Kelly, from the Southern Sydney Retailers Association, is a supermarket chain's worst enemy. He's crossed the Tasman to conduct an experiment which could have enormous ramifications for Australia's highly concentrated supermarket industry.

"The New Zealand market is no hot-bed of competition. It's just a normal competitive market by world standards. Australia is the dysfunctional market, so it enables us to compare a functional market with competition against a dysfunctional market in Australia," Craig Kelly said.

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The New Zealand grocery market is almost identical to Australia's. That is, it's a duopoly with two major players. Here it's Woolworths and Coles calling the shots. In New Zealand, it's Woolworths-Progressive and the larger Kiwi owned co-operative, Foodstuffs, which runs the warehouse-style Pack and Save stores.

"The ACCC Grocery Inquiry tipped us off. At the inquiry, Woolworths admitted under cross examination that they make a higher margin on their product, they make higher profits and higher mark-ups in Australia than they do in New Zealand," Craig said.

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"I believe I can buy my weekly groceries here in New Zealand and I can save enough money to pay for my air ticket back to Sydney. Still have my shopping and have a few dollars still in my pocket."

If you think this sounds crazy take into account these two factors. All of these Australian items have been shipped there. So there are transportation costs. As well, everything has a GST of 12.5%, so those Australian items should be more expensive, not cheaper.

Craig made up an average shopping list for the average family of four. All products were Australian made, Woolworth's own brands or packed in Australia. They were also found on New Zealand shelves.

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Today Tonight chose a Woolworths store at random.

Craig didn't buy meat or fresh vegies because they can't be taken back through quarantine. Everything was either packaged, frozen or sealed groceries that can be brought back into Australia.

All up he bought 71 items which cost $249.50 New Zealand dollars. Converted to Australian dollars - $196.19.

So take off the GST and our New Zealand groceries cost $174.39.

Craig Kelly then bought the same basket of groceries at a suburban Woolworths store.

The Australian groceries cost in total $286.96.

Some comparisons are as follows:

Vegemite NZ - $2.93 in New Zealand dollars. $2.99 in Australia. But convert to Australian dollars, the Kiwi buy is $2.33 and if you take off the GST, it's $2.07.

Kraft Peanut Butter - $4.44 in Auckland. $3.95 in Australia. Convert to Australian dollars,$3.52. Take off the GST, it’s $3.13.

And our Golden Circle Pineapple Pieces - $1.48 at Woolies in Auckland $1.89 here. In Australian dollars it's $1.17 and with no GST down to $1.04.

Sue Shoesmith has shopped in Australia and now lives in Auckland. She can't believe the difference.

"When I first came here, I've got used to it now, but I would say probably say on an average shop perhaps $30 to 40 less on just staple items. That's not meat or veg and things like that."

"Every week when I go shopping I work out prior to going how much I think I'm going to spend and it always comes in $20 or $30 less than I was expecting to spend. And that's largely due to in store specials. One day specials. Buying in bulk specials because all of the supermarkets are competing trying to get you in the door, to get your money. So the competition makes a big difference," Sue said.

Tony Carter is the Managing Director of Foodstuffs, the largest grocery chain in New Zealand and Woolworth's major competitor. Their Pack and Save stores are all owner-operated and compete with each other for every dollar.

"Oh it does surprise me especially considering there is a 12.5% GST on food in New Zealand where there isn't in Australia," Tony Carter said.

"Certainly I can only speak for the New Zealand market which is very intensively competitive. We don't have institutions that own us, our store owners own us and they are absolutely focused on doing the very best job they can for customers."

Woolworths have said it's the suppliers. Does this mean they're trying to get into the market in NZ and cutting them a better deal there than here?

"It cannot be the suppliers. Woolworths have told us for years that their giant buying power, their economies of scale enable them to get the best price from their suppliers, now they're telling us in New Zealand where there's a much smaller market they're able to get lower prices. It simply doesn't make sense," Craig said.

There's now no denying groceries are cheaper across the Tasman. Today Tonight's experiment proved that. But despite our cultural similarities, it seems our grocery markets could not be more far apart. It's still a long way to go to do the weekly shop.

"This is the smoking gun. This is the smoking gun that proves once and for all, beyond all doubt, that Australian consumers are being ripped off and done over," Craig said.