The facts behind food price scare

By Amelia Wade

Data shows cost of fruit and vegetables has risen 14.2 per cent in five years, compared with CPI increase of 15.7 per cent.

Principal economist Shamubeel Eaqub said the rising cost of food often inspired emotive reactions. Photo / Marty Melville
Principal economist Shamubeel Eaqub said the rising cost of food often inspired emotive reactions. Photo / Marty Melville

Food prices are not becoming more expensive as the increase in cost tracks the rate of inflation, an economist says.

The cost of a basket of fruit and vegetables has increased by 14.2 per cent in five years, according to Statistics New Zealand data requested by the Herald.

The Consumers Price Index - a measure of inflation - has jumped 15.7 per cent over the same period.

Shamubeel Eaqub, principal economist at the NZ Institute of Economic Research, said the rising cost of food often inspired emotive reactions.

"When you look at these issues, you sort of need to step back a bit."

Mr Eaqub said food prices were not becoming more unaffordable. Since 2000, the average hourly wage had risen by about 50 per cent while food prices had risen about 30 per cent, he said. "Typically speaking wages will rise quicker than the cost of living.

"But what happens when you have rising incomes is that as a household moves up an income bracket, it might choose to buy Wattie's rather than Pams, more meat, it might choose to have more vegetables - all of those things are going on underneath."

Mr Eaqub said food price increases were more noticeable in poorer households.

Statistics New Zealand's prices manager, Chris Pike, said factors like the seasonal availability of fruits and vegetables and the increase to GST by 2.2 per cent in 2010 should be taken into account.

"And then you've got factors like the Queensland floods which impact the price of our winter produce, such as in 2011."

And the Herald's shopping basket does not account for relative importance - that is how much New Zealanders are buying of each product at a certain time.

However, over the period of January 2007 to December 2012, the Food Price Index - which measures relative importance - increased by 17.4 per cent, putting it in the same ballpark as the Herald's shopping basket, Mr Pike said.

The Herald's shopping basket comprises 1kg each of oranges, bananas, apples, kiwifruit, lettuce, potatoes, mushrooms, carrots, tomatoes, cabbage and broccoli.

A nzherald.co.nz online poll found 82 per cent of people would definitely buy more fruits and vegetables if they were cheaper - the cost is the major deterrent.

Fourteen per cent said they would "maybe" buy more, but the goods would need to be significantly cheaper. And 4 per cent said cheaper fresh produce would not make them buy more because they don't eat many fruits and vegetables anyway.

- NZ Herald

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