I just popped in to the supermarket for a couple of things which, as invariably happens, turned into a basket full and a checkout total more than twice the amount I was expecting.
The latest food price index from Statistics New Zealand helps to explain why: food prices inceased 2.7% in August which is the biggest rise since July 1989 when GST increased from 10% to 12.5%.
All five subgroups recorded upward contributions to the latest Food Price Index (FPI) increase, with the most significant upward contribution coming from the fruit and vegetables subgroup (up 9.6 percent). Within this subgroup, the main contribution came from vegetable prices (up 14.5 percent), driven by higher prices for lettuce (up 33.6 percent) and tomatoes (up 42.8 percent). If vegetable prices had remained constant at July 2008 prices, the FPI would have risen 1.3 percent.
Vegetable prices have increased by a total of 36.4 percent over the past four months, with growing conditions hampered by unusually wet weather.
Grocery food went up 1.9% and meat, poultry and fish increased by 2.6%.
The most significant upward contributions to these subgroups came from, in order of significance, higher prices for cakes and biscuits (up 8.0 percent), fresh milk (up 4.4 percent), and lamb (up 16.8 percent). The most significant downward contribution came from lower prices for yoghurt (down 8.9 percent).
The annual increase in food prices of 10.6% in the 12 months to August was the largest since the year to May 1990.
All five subgroups recorded upward contributions to the annual increase, with the most significant being the grocery food subgroup (up 13.1 percent). Within this subgroup, the main contributions came from higher prices for cheese (up 43.8 percent), bread (up 17.4 percent), fresh milk (up 12.5 percent), and butter (up 87.6 percent).
The fruit and vegetables subgroup rose 19.1 percent in the year to August 2008. The most significant upward contribution came from higher prices for lettuce (up 145.3 percent).
These increases are well above most increases in pay rates and come with high interest rates and the increase in the price of other necessities such as fuel and power.
All of those will be straining household incomes which will be contributing to the slowing domestic economy. That was one of the factors which prompted the Reserve Bank to drop interest rates this morning but it will take a while before the impact of that filters though to household budgets.
And even with this happening, we still have Labour pushing through an ETS (with National’s approval, as they’ll keep it with minor modifications) that will drive up the cost of living even more while reducing wages and increasing unemployment. Crazy.
We need to repeal the ETS, but National won’t do that. Taking GST of basic food groups would help too. Fiddling with interest rates will never have the effect that these two policies will.
Taking GST of basic food groups would help too
So shall I take it that the Family Party endorses RAM’s GST-off-food campaign?
What would you say to the idea that grocery stores, having seen that people will accept the current food prices, would simply pocket the GST differential as profit?
More than that, our policy is to take GST off:
- Basic, primary staple foods such as fruit and vegetables
- Household electricity
- Infant and elderly necessities
- Rates (a tax on a tax)
- And off the excise duty on fuel (a tax on a tax)
You have a valid concern, but the competitive nature of the food sector, with Countdown and Pak’n'Save always trying to undercut each other, should ensure that the GST cut actually results in lower prices. This policy is used overseas, and works well – I was in Ireland over the last two years, and although most stuff there is more expensive than in NZ, basic staple foods were a similar price or cheaper (you could buy a loaf of bread for the equivilent of 70cNZ for example), a good part of which is due to the lack of GST (VAT in Ireland).
Ya! It is acceptable by every common man that prices are up between 5 and 10 per cent because higher oil prices have made importing vegetables more expensive.But there’s no choice because we can’t just go without vegetables.
Hope on reducing the prices.