Editorial: Food prices increase shock is hopefully at the peak

The glovebox of a Dodge Caliber SXT has an inbuilt chiller. Photo / Supplied, File

Editorial

EDITORIAL

An old joke goes something like police have issued an all-points bulletin after a woman reported having $300 worth of groceries stolen from her car's glove compartment.

The joke is not so funny right now with confirmation yesterday that annual food prices have increased faster than at any time in the past 13 years.

The 8.3 per cent leap last month compared with August 2021 was the biggest annual increase since the Global Financial Crisis in July 2009.

The pain has been felt most in the green grocery department. Year on year, fruit and vegetable prices in New Zealand increased 15 per cent. Meat, poultry and fish were also up 7.6 per cent compared to August last year.

Supermarkets have defended the increases as being in line with higher costs from suppliers. Countdown said increases requested by suppliers to Countdown averaged 8 per cent in August, with meat (up 12.2 per cent), fresh produce (12.9 per cent) and bakery items (9.6 per cent) the main drivers. Foodstuffs reported similar figures.

Suppliers are, of course, hit by higher fuel costs, shipping disruptions and having to pay higher wages to attract workers as migrant and seasonal employees are still scarce on the ground.

Critics of the Government have been quick to place the blame on the present administration's shoulders. Act Party leader David Seymour says the Government's "war on businesses and relentless borrowing and spending has fuelled domestic inflation, which has crept into our most productive sector".

But these factors are only part of the story. Global food prices have surged 65 per cent since the start of the Covid-19 pandemic and by 12 per cent this year alone since the start of the Russian invasion of Ukraine, according to data from the United Nations' Food and Agriculture Organisation.

As ANZ chief economist Sharon Zollner yesterday pointed out, higher global food prices typically benefited the country because New Zealand was a major food exporter. However, the benefits are not distributed evenly and those on low incomes bear the brunt of the higher prices.

In this respect, the Green Party is correct in pointing out that the issue is a matter of equity. As costs have gone up, incomes have changed little. People are making what they have spread even further. The Greens make the case to boost incomes, particularly for those on benefits but the Government will be wary of such a move contributing to inflation.

American investment firm Morgan Stanley forecast last month that food prices will peak this year and begin to drop next year. The prediction is based on high farming margins in recent years leading to crop investments and acreage expansion, as well as optimism for de-escalation in Ukraine.

Some economists in recent weeks have also told the Herald inflation had probably peaked.

Data on the country's GDP for the June 2022 quarter is due out today. Any signs of easing will be a relief to the Government, fast-moving consumer goods retailers and suppliers but mostly to those trying to feed a household on what may fit in a glove compartment.