GST rise affects food prices

Food prices rose 2.2 percent in the October 2010 month, Statistics New Zealand said today. Prices were affected by GST rising to 15 percent on 1 October 2010.
 
"Food prices were affected by the rise in GST. About two in every five food prices collected in October 2010 increased by 2.0 to 2.5 percent, once prices affected by discounting were excluded," Statistics New Zealand prices manager Chris Pike said.
 
Grocery food prices rose 1.7 percent in October 2010, with higher prices for cakes and biscuits (up 4.0 percent), cheese (up 4.6 percent), and fresh milk (up 2.0 percent). For grocery food prices not affected by discounting, one in two rose by 2.0 to 2.5 percent. One in 10 prices rose by 2.5 to 5 percent, while one in six recorded no price change.
 
The fruit and vegetables subgroup rose 4.0 percent in October 2010. Fruit and vegetable prices usually fall in October, however, prices in October 2010 were affected by the GST rise and adverse weather in September. 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 percent for the year to October 2010, influenced by the GST rise. All subgroups made upward contributions. The most significant upward contributions came from fruit and vegetables (up 16.4 percent) and grocery food (up 4.7 percent). The remaining three subgroups recorded higher prices: restaurant meals and ready-to-eat food (up 3.7 percent), meat, poultry, and fish (up 1.7 percent), and non-alcoholic beverages (up 0.7 percent).

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

Highlights
In October 2010 compared with September 2010:

• Food prices rose 2.2 percent.
• The rate of GST rose from 12.5 percent to 15 percent on 1 October 2010.
• Grocery prices rose 1.7 percent.
• Fruit and vegetable prices rose 4.0 percent.
• Meat, poultry, and fish prices rose 2.9 percent.
• Restaurant meals and ready-to-eat food prices rose 1.9 percent.
• Non-alcoholic beverage prices rose 1.7 percent.

From October 2009 to October 2010:

• Food prices increased 5.1 percent.