Food prices up 2.2pc - fruit and veg climb

Photo / Martin Sykes

The impact of a higher GST rate has been felt in the supermarket, said Statistics NZ, with food prices rising 2.2 per cent in October.

"Food prices were affected by the rise in GST. About two in every five food prices collected in October 2010 increased by 2 to 2.5 per cent, once prices affected by discounting were excluded," Statistics New Zealand prices manager Chris Pike said.

GST increased from 12.5 per cent to 15 per cent on October 1.

The latest monthly food price idex shows grocery food prices rose 1.7 per cent during the month, with higher prices for cakes and biscuits (up 4 per cent), cheese (up 4.6 per cent), and fresh milk (up 2 per cent).

ASB bank economist Christina Leung said the 2.9 per cent increase in meat prices also reflected the recovery in New Zealand dollar-denominated international meat prices earlier in the year flowing through to the retail level.

"We expect a continued recovery in meat prices at the retail level over the coming months, given the elevated level of international meat prices."

Higher international commodity prices were also reflected in the substantial increase in the price of many dairy products. Within the 1.7 per cent increase in grocery prices, there was a 6.3 per cent increase in preserved milk prices and 4.6 per cent increase in the price of other milk products.

Leung said "anecdotes have been mixed" as to whether retailers have passed on the full cost of the GST increase at the beginning of October.

"While some retailers have chosen to use the GST increase to review their prices, others have chosen to absorb the GST increase into their margins."

She said today's results were in line with these anecdotes, and show that on net prices increased in line with the GST increase.

Statistics NZ said that for grocery food prices not affected by discounting, one in two rose by 2 to 2.5 per cent. One in 10 prices rose by 2.5 to 5 per cent, while one in six recorded no price change.

The fruit and vegetables subgroup rose 4 per cent in October 2010. Fruit and vegetable prices usually fall in October, said Statistics NZ, however prices in October 2010 were affected by the GST rise and bad September weather.

Unusual weather conditions in September pushed up prices in October for some vegetables, in particular broccoli and cabbage. In October, usual seasonal increases were recorded for potatoes, carrots, and apples.

Food prices rose 5.1 per cent for the year to October 2010, influenced by the GST rise.

The most significant upward contributions came from fruit and vegetables (up 16.4 per cent) and grocery food (up 4.7 per cent).

The remaining three subgroups recorded higher prices: restaurant meals and ready-to-eat food (up 3.7 per cent), meat, poultry, and fish (up 1.7 per cent), and non-alcoholic beverages (up 0.7 per cent).

If all the GST rise from 12.5 to 15 per cent was passed on by a retailer (and all other things remained equal), a food item would have cost 2.2 per cent more in October than in September, said Statistics NZ. It said it was not able to quantify how food prices would have changed in October if the rise in GST had not occurred.


- HERALD ONLINE