In New Zealand, the rising price of everyday items is sobering: bread costs 64% more than three years ago, butter is up 57% and electricity 27%. Hikes like these are causing politicians across the spectrum to propose radical market interventions to improve competition and lower costs ahead of next month’s election.

While some consumers may be won over ahead of the Nov. 7 vote, business leaders are spooked by the idea of a more activist role for the state.

The proposals are “completely understandable when you think about what we’re going through in the cost of living and desire to see governments do something about that,” said Paul Newfield, chief executive officer at Wellington-based global infrastructure manager Morrison.

But New Zealand has earned a reputation for being a reliable home for foreign capital, and “what New Zealand needs is capital,” he said in an interview. “Don’t damage what you’ve spent decades building up,” Around the world, cost of living has been a central issue in recent elections, with wars in the Middle East and Russia adding pressure on food and energy prices.

What is striking in New Zealand is how far politicians are prepared to go in response, particularly in a country that was a strong proponent of free-market reforms in the 1980s and 1990s and built a reputation as a stable and predictable place to do business.

The prospect of deterring foreign investment would normally alarm politicians trying to revive a sluggish economy. But public pressure has swung the focus toward finding any solution to the cost-of-living crisis, especially amid falling home prices and higher interest rates.

Among the pledges from multiple parties is the break up supermarket chains, as well taking on power companies and even threats to bring one of the biggest banks into state ownership.

“The political environment has become so panicked that threatening businesses who’ve done nothing wrong has become a legitimate political strategy,” said David Seymour, leader of the libertarian ACT Party, which has no takeovers planned.

The New Zealand Initiative, a business-backed independent think tank, last month published an open letter to the leaders of the political parties asking them to withdraw their polices. The letter was signed by 51 business leaders, including Nick Mowbray, the billionaire founder of toy company Zuru, Jason Boyes, the chief executive officer of Infratil Ltd. and Antonia Watson, the recently retired CEO of ANZ Bank New Zealand.

The letter described the interventions as “heavy handed,” warning that forced sales and breakups “tell investors around the world that ownership here depends on political convenience.”It has become a particular vulnerability for the governing National Party, which prides itself on economic management but has struggled in opinion polls.

“The cost of living is top of mind for a lot of households,” said Brad Olsen, principal economist at Infometrics. “Clearly at the moment there are some pretty big pressures, particularly around fuel costs that are really biting.”

“The last time we had a big cost-of-living pressure build up around that last election we also had such a tight labor market that wages sort of were broadly keeping pace with changes in costs,” he said. “At the moment you’ve got the highest unemployment rate in 11 years, more subdued wage growth and still large increases in some of the more essentials costs.”But much of the focus is on basic foods —ground beef is 35% more expensive than when the current government was elected in October 2023, while milk costs 30% more — bringing the supermarket sector squarely into the sights of policymakers.

The sector is dominated by two players — the local unit of Australian operator Woolworths Group Ltd. and the much larger Foodstuffs, which is a cooperative running more than 500 stores. A report in 2022 found the pair operated as a duopoly that kept prices elevated, while making it difficult for new entrants to expand.

Although now subject to regulatory oversight, the duopoly persists. Finance Minister Nicola Willis in early 2025 said her government was actively seeking a third player to enter the market, but no one was interested.

National has pledged to split Foodstuffs in two if the Commerce Commission determines consumers would benefit, while New Zealand First also backs breaking up the cooperative.

The main opposition Labour Party wants Foodstuffs and Woolworths to separate their wholesale operations, while the Green Party would force them to sell at least 120 stores to a new, publicly owned chain.

Labour is also proposing to make price gouging illegal across other industries such as energy, fuel, telecommunications, banking and insurance. A new law will define when prices being offered by dominant players become unfair and excessive, and it will give the Commerce Commission more power to investigate and seek penalties. Some politicians want to go further in other industries.

In banking, four Australian-owned lenders dominate, with around 85% of all deposits. New Zealand First, part of the ruling center-right coalition, wants to buy Bank of New Zealand, the nation’s third largest lender, from National Australia Bank and merge it with existing state-owned Kiwibank. That would create a much more significant player which, it argues, will change the behavior of foreign-owned banks.

In electricity, four companies operate almost all the nation’s generation plants and also sell the power to consumers. New Zealand First wants to split the so-called gentailers, so that competing retailers can enter the market and ensure generators can’t limit supply to inflate prices.

The Greens also back separation, and propose a publicly owned entity that will invest directly in new renewable plants. It plans to call the company Kiwipower.