Surging food prices - up 0.8% in May and 6.8% annually - are casting doubt on whether the rate of overall inflation is set to peak soon.
And the food prices are becoming very political, with Minister of Commerce and Consumer Affairs, David Clark stepping up his war of words with the supermarkets and saying: "New Zealanders pay too much for the basics and today’s figures provide more evidence of why we need to change the supermarket industry, and fast."
Meanwhile National's deputy leader and finance spokesperson Nicola Willis says: "These rapidly rising prices are part of the wider inflation tsunami hitting our economy, with hard-working Kiwis left swamped in its wake, as their wages rise slower than prices.
"While Labour likes to put this all down to pricing decisions made by supermarkets, the truth is New Zealand’s inflation problem is far more widespread."
Statistics New Zealand says food prices rose a seasonally adjusted 0.8% in May, bringing an annual increase in the cost of food to 6.8%.
After hitting a 10 year high of 7.6% as of March, annual food price inflation eased back to 6.4% in April, but now it's risen again.
Food prices are a significant contributor to overall CPI inflation, so these latest figures may cast some doubts on the hopes of economists and the Reserve Bank (RBNZ) that overall inflation will peak (at around 7%) in the June quarter.
ASB senior economist Mark Smith said grocery food prices registered "a solid rise in May" and will be under close scrutiny after signalled price freezes by the major supermarket chains and with government regulators looking at a range of measures to contain price increases.
"Retail prices for beef and lamb eased in May but look set to climb in the coming months given strong export prices."
Smith said despite the housing market being in retreat dwelling rents continue to firm given high headline CPI inflation, solid demand for rental properties, and housing policy changes.
"What’s more, domestic fuel prices are expected to gain over the coming months, given strong global oil prices (up roughly 60% since the start of the year) and the weaker NZD (down close to 8 US cents since late March).
"All up, annual NZ CPI inflation looks like it will move above 7% in the June 2022 year (we have pencilled in 7.2%) and end 2022 at around 6%, with the clear risk that high inflation outcomes prove to be more persistent than earlier envisaged.
"This will clearly trouble the RBNZ and prompt a more aggressive signalled pace of OCR hikes despite a weaker backdrop for economic activity."
So, those food prices...
Bad news if you like yoghurt: It was actually the biggest single driver of price rises among grocery food items in May, with a six-pack of yoghurt rising from $5.60 to $6.40.
Grocery food items rose 1.1% in May.
"Many dairy items have seen price increases over the past month," Stats NZ's consumer prices manager Katrina Dewbery said.
"Yoghurt has seen the largest increase, with the weighted average price of a six-pack of yoghurt increasing from $5.60 to $6.40.
"Other consumer dairy items that have increased in price included butter, milk, and cheese. We have also seen increases in prices paid for dairy manufacturers’ goods and services in our producer’s price index. “
In May 2022, restaurant meals and ready-to-eat food were 1.0% higher than in April 2022. This increase followed a 1.4% increase between March 2022 and April 2022, which was the largest monthly rise in over 10 years.
In terms of the 6.8% annual rise in food prices to May 2022, Stats NZ said the increase was due to rises "across all the broad food categories we measure".
Here are some of the main points:
- grocery food prices increased 7.4%
- restaurant meals and ready-to-eat food prices increased 6.0%
- fruit and vegetable prices increased 10%
- meat, poultry, and fish prices increased 7.0%
- non-alcoholic beverage prices increased 2.7%.
Grocery food was the largest contributor to this movement, with increasing prices for restaurant meals and ready-to-eat food providing the second largest contribution.
"Average prices for grocery food items like yoghurt, milk, and cheese were all notably higher than they were in May 2021," Dewbery said.
"The increase in restaurant meals and ready-to-eat food was influenced by rising prices of eat-in lunch/brunch meals at restaurants."
The latest surge in food prices comes despite supermarket operators heavily publicising price reduction programmes.
Since the last food price figures came out in May, the Government has talked tough with the country's supermarkets and is pledging to go further than a recent Commerce Commission inquiry into the sector recommended.
Minister of Commerce and Consumer Affairs, David Clark is pledging to effectively force the supermarket operators’ wholesale arms to supply competitors - or it will regulate. He says the operation of the supermarkets should be reviewed annually - rather than every three years as the commission recommended. And he's looking at compulsory unit pricing on grocery items - IE detailing how much something costs per gram, so, that this makes price comparison easier for shoppers.
Also, Clark said the Ministry of Business, Innovation and Employment (MBIE) is "undertaking further work" around possibly requiring major grocery retailers to divest some of their stores or retail banners.
In his statement released on Tuesday following the release of the latest food price figures, Clark said Finance Minister Grant Robertson met last week with executives from US retail giant Costco in Sydney to talk about its possible expansion into Wellington and Christchurch, while "as recently as this morning" Clark had met with New Zealand’s third biggest grocery provider Night ‘n Day, to discuss the Government’s ongoing action to increase competition in the sector.
“Night ‘n Day chain has 57 stores, but a lack of access to wholesale groceries has been a major barrier when it comes to market expansion.
”I am reiterating my call on the supermarket duopoly to strike good-faith deals with their competitors to provide access to wholesale groceries, or regulatory measures will be put in place.
“The Government is not afraid to unlock the stockroom door to ensure a competitive market if the supermarkets don’t get on and do it themselves quickly.
“In any case, I aim to have a regulatory backstop finalised by the end of the year – but supermarkets would be well advised to organise their own agreements sooner.
“We’re also moving fast on the mandatory code of conduct, a unit pricing scheme and the establishment of an industry watchdog to keep supermarkets in the spotlight,” Clark said
However, National's Willis said Finance Minister Robertson "has no plan to tackle inflation".
"The Government has instead poured more fuel on the fire with more government spending, pushing up interest rates and worsening the cost of living crisis.
“The Government should adopt National’s five point plan to fight inflation - refocus the Reserve Bank on price stability, stop adding unnecessary costs to businesses and employers, reduce the bottlenecks that are holding back growth, including addressing labour shortages, restore discipline to Government spending and inflation-adjust tax brackets to increase Kiwis’ disposable incomes.
“This week many families will bypass the yoghurt in their weekly shop, put off by the sky-high cost. It’s time the Government stopped blaming the war in Ukraine, stepped up and delivered a plan to fight inflation."
Food prices index
Select chart tabs
97 Comments
We have really noticed the supermarket price rises over the last month or so, which would seem to fit with what the article is implying. What used to be a $120-$130 shop is now $140-$150 (we shop every 5-6 days). Govt doesn't seem to have a clue what to do, which is par for this lot. Big question for Jacinda; will it really crash this year & maybe pick up again later next year, so hang on till end of 23 for election? Or will it be worse next year therefore possibly go to the polls later on this year? What is the lesser of two evils.
Us too. Used to have a budget of $400/week (including takeout once a week).
Thought we might save a bob cutting some nice-to-haves out to take us down to $300 week back in January.
We break budget every week now, and yet our fridge and pantry seem bare more often than not.
Personally, I'm pretty sure the supermarkets are still creaming it - watching the price of my treat (1 bottle Moa Tripel perhaps every fortnight), and I can see they have an algorithm controlling their prices. When the shelf is full, and there's stock out the back, it's $8. When the shelves partly full, it's $10. And when I'm buying the last bottle in store (as determined by out-of-stock tag the next day) it's $13. And back to $8 next shipment. Unless they are loss-leading at the start, they are pushing the prices up themselves.
They can do this - it's a business, they may operate how they like.
But I am conscious that when Covid hit, our food bill doubled because the only things we could buy was the expensive products. And were I in such an essential business in these times, I'd be tempted to keep my most profitable items stocked up first also - what are people's alternatives? Oh that's right - starve!
I wonder how much of the franchisee's remuneration was included in the "excessive profits" calculation?
I worked too long for an outfit whose policy to fix a faulty product outcome, was to find someone to blame. Didn’t work & won’t for this government either. History is clear on the results of printing money but they heedlessly and needlessly ploughed on and on. Thus they created in inflation, a tiger which they now have well and truly by the tail. An extremely unkind and serious dilemma imposed on the greater percentage of New Zealand households.
It will only get worse, the petrol subsidy comes off soon, shortage of diesel, everyone will be paying close 3.65 a litre, with diesel not far behind. This will be built into the price and up go prices's again. But when you sit in a office and get your food/meals mostly paid for, you are shielded from every day realities of your policies. But the voter is'nt, and they will tell you come October 2023.
Pop into tauranga city council office one day. Thought it must have been someone's birthday, was informed a spread like that is the daily. I was there for a business meeting, havnt been back so can't confirm. Council worker had no reason to lie...
I've never worked anywhere like that either. But believe, and have seen, some consultancys are the same. Good money in talking about it, no free lunches for the doers of it.
And just what do you think any government under the same circumstances could do?
GST needs to come off essential items, like it is in many other countries, Australia included, AND it needs resetting to %s similar as well. Ramp it up on stuff that's no good for us, but we don't seem to have any politicians in a position to do something about that here, at all.
Nats could put it back up again, like they did last time around.
Pre-Covid shop $140pw covering meat, vege and household items at supermarket.
Post-Covid: $180 + $40 fruit, vege and seafood bought elsewhere.
Notably and cynically, a lot of chicken has disappeared from the bulk '3 for $20' deals that we used to buy. So I guess we'll take the hit and swing even further towards vegetarianism.
We're not quite at depression-levels of boiling chicken carcasses for soup, but we're not far away either. Ask me again in six months.
I am preparing for the transition to early retirement and tracking expenses with PocketSmith (local company). With only two Boomers in the house, we struggle to get below $1,350 per month unless we start cutting out the nice to haves like Nespresso. I’m not sure how families are coping.
I've been using Pocketsmith too, very handy. To be honest I don't see a discernible trend in grocery spending since I created the budget at the start of 2021. $200 a fortnight for two adults and two cats still does the job quite nicely, although there is a separate $200 a fortnight budget for takeaways and restaurants.
I do a lot of simple cooking so most of what I buy hasn't really changed. Pasta, rice and wholefoods are still super cheap especially dried beans and lentils etc. We have a breadmaker so good quality bread is cheap and easy, rarely buy meat, grow a lot of veggies ourselves and I brew my own booze. Lots of delicious daals, soups, pasta dishes and salads on the menu for a dollar or two per serving.
.. Complex carbs such as whole grains : brown rice , rolled oats , weatie bix remain cheap : excellent nutrition & full of fibre ... as do the legume family , the beans & peas : a little goes a long way ...
Huh , a message to the health minister , wouldn't that be nice if a Little goes a long way ...
We've been retired for 10 years and shop online every week for two of us only. I manage to keep the total to just over $200 a week and we eat very well, though I do spend an extra $15 at the local fruit and veg shop. That total always includes a few bottles of wine (around $20 each) and treats like biscuits, icecream or potato chips etc. We never have takeaways either. So I wouldn't be able to spend $1350 a month, even if you told me I could go mad and buy whatever I wanted! What expensive stuff do you have on that list?
As others have said, I am really noticing it now when doing the shopping.
You can see the pain on people's faces when doing the groceries ... particularly hard when you see mum & dad and the two kids walking around Pak N Save, having to put items back or say to the kids they can't have what they'd normally have that week.
We are fortunate enough to have a good buffer in our budget (and due to some changing family circumstances we aren't going out as much, so our petrol and entertainment spending is more than offsetting the rise in food prices). Brutal for those on fixed incomes/budgets who have already cut what they can.
Economists call this process shrinkflation - increase the price and simultaneously decrease the quantity (often even the quality).
Some of the homebrand items I regularly buy have gone from having "New Zealand Made" on the packaging to saying "Made in NZ with local and imported ingredients".
Also, Asaleo used to manufacture most of their products in NZ. I now see "Designed in NZ" on their packaging.
At my local Pak N Save here in Napier, a 500 gram block of Mainland Vintage cheddar used to sell consistently for between $9.99 and $10.99. Most common price was $10.39. It jumped around but was pretty much always in that band. I went to buy a block today and it was $16.59. Hmmm....that is one hell of a jump in price!
Many items have jumped in price but this one really stood out. I guess the large price jump must be due to the fact that it is "imported" in to Hawkes Bay.....from Taranaki.
... our whole lives , our economies , are underpinned by energy ... food for our bodies , petrol & electricity for our transportation & industries ...
For too long NZ has coasted along on plentiful hydro power , and cheap imports of oil ...
... the answer to taming inflation , and to gaining true independence , is to deepen & broaden our energy supplies from within ...
It will keep escalating too, energy prices underlie EVERYTHING in our economies and yes, even the food we eat due to needing oil for all parts of the food production/packaging/storage/transportation process. Energy poverty is quickly turning into food poverty. I am surprised that more countries, particularly poor ones, haven't fallen over yet (Sri Lanka being the one I can think of right now).
The WorldBank is beginning to report acute shortages of staples in poorer countries due to price: https://www.worldbank.org/en/topic/agriculture/brief/food-security-upda…
It's only the beginning, with oil prices likely to keep heading north towards $200 USD/b we are going to be on a real rollercoaster soon. NZ/Aus can expect the resumption of refugees on boats as it gets worse.
exactly! the vilification of the fossil fuel industry and BS decarbonation policies have contributed to a $trillion of under investment
We will all pay the price for the woke politics as no large scale replacements have been found or implemented
https://www.statista.com/statistics/688510/global-oil-exploration-and-p…
The foods I regularly buy have been priced well lately. At New World picked up a 2kg hunk of sirloin for $22kg, 4.5kg rump at $16kg and pork chops at $15kg. Eggs and cream seem about the same price. Don't waste your money on vegetables as they are mostly water anyway and fruits have been selected to be so high in sugar that you are practically eating lollies.
I have the CHO Factor for grapes at 0.15 i.e. 15%. But grapes are an example of a fruit higher in sugar and they will spike BGL. In saying that, blueberries have a CHO Factor of 0.17 - higher than grapes, but you don't give insulin for blueberries (or any kind of berry that is), unless you are eating heaps of them.
Not all fruit is created equal and to state that all fruit is selected for the highest sugar content, by which you are implying that you shouldn't eat any of it (I assume?), is blatantly false and misleading.
Fruit contains plenty of fiber, which makes all the difference between grapes and lollies. Fiber slows down the rate of absorption of the fructose, among many other health benefits.
Not much sugar in meat, but not a hell of a lot of fiber either. In a country where colorectal cancer is a major killer, people need to be eating more fiber, not less.
80/20 mince at Countdown is usually $14.99 per kg. Fat will be your primary energy source if carbohydrates are kept to a minimum. It's not as bad as it sounds as the idea is to switch the body to burning fat meaning it will burn stored fat and fat in the bloodstream more readily. Thus heart problems, in theory, will be reduced. Many people are getting fat because their fat burning ability is compromised. You could eat practically no fat yet have clogged arteries due to the conversion of sugar to fat whereas a fat burner will have clean arteries. It makes sense to me.
I make special trips to New World for their cheaper meat. The ones I go to have the very large sized lumps of meat for sale like rump, sirloin and scotch fillet that often seemed marked down. They are also fairly reliable for duck fat. They have beef liver and other offal meats at very reasonable prices too.
But you've made two modifications there? How do you differentiate the influence of each on your now reduced cholesterol?
Also to consider, not all fats are equal in health/metabolism terms. Different fats sit in different places of a simple spectrum of good to bad.
Groan. You reduce animal fats. I still eat a pile of Avocados. Pretty shocked at New Zealand's lack of vegetable consumption it's so noticeable at Burger joints where you see people pulling the lettuce and tomato out. Perhaps stop and think as to why NZ is a world leader in bowel cancer.
Bowel cancer.
Is it the amount of animal protein? The amount of processed animal protein (smoked, cured meats)? Propensity for BBQ steak and sausages? The alcohol consumption? The amount of nitrate and nitrite in our drinking water? Our general lack of physical activity? Or as you mention, lack of dietary fiber?
If only we knew definitively we could solve that problem yesterday as well.
National’s five point plan to fight inflation -
1. refocus the Reserve Bank on price stability - Increase interest rates
2. stop adding unnecessary costs to businesses and employers - Subsidise corporates to fleece NZ'landers and wreck the environment
3. reduce the bottlenecks that are holding back growth - Deregulate to further allow corporates to fleece NZ'landers and wreck the environment
4. including addressing labour shortages - Import labour from 3rd world countries, who have a lower expectation for standards of living, and who accept 2 and 3 above while young NZ'landers flee.
5. restore discipline to Government spending and inflation-adjust tax brackets to increase Kiwis’ disposable incomes - Tax relief for the rich to widen inequality and increase crime and block much needed infrastructure spending and reduce the standard of living.
Clowns.
My policy preferences have not changed, neither did I vote for Labour though I did agree National were not taking NZ in a good policy direction and should have lost power. Nor have I been shy of critcising Labour's performance or policy on this board.
Seeing Labour and National become two very close shades of Natbour is sad for the country, obviously, as it would be good to have a major party sincerely interested in productivity rather than land speculation. Blindly voting for one of them just because they're one's team regardless of them bringing useful policy seems silly, though.
Be better to vote for useful policies. Returning to intergenerational looting isn't a great alternative.
Unlike Millennials, I have lived through high inflation periods in NZ. It’s horrendous. This lot have no idea.
A good example of that is the idiotic $350 payment. My wife will receive it, just in time to fly Business Class to Paris. Worse still it’s borrowed money.
Yeah they just be to have orchestrated this global inflation and shortages supplies.
But just not very good at it, seeing as our inflation rate is still in the bottom third of OECD countries.
It blows my mind some people on the right just put their head in the sand and think a change of government (To a National party with very little ministerial experience) will somehow turn around global inflation.
But hey, it might be a good one for Labour to lose. National get in, drop taxes, stoke inflation and cause unemployment to go through the roof and they will be a one term government.
Last time I looked it was corporate's and SME's that employed people, out of that the people paid PAYE and corporate's (not all...but that's another story) tax. Who gave it to the government, to inject into the health sector and education etc..who employed people who paid PAYE, who government then gave to the people who didn't work, (or the unfortunate ones who can't). So you saying screw corporate's and SMEs, as we don't need them in this equation? if you hate inflation then I am fairly sure you are really going to hate stagflation.
I agree that businesses / corporates are important. But they don't have a social conscience, their main goal is profit for shareholders. Because of this they can cause huge social and environmental damage. Competition and regulation are important for the system to work in a way that benefits all people, not just shareholders. That is the social contract. You also can't call yourself a capitalist if you support corporate subsidies. So no, don't screw the corporates, but equally don't let them run wild at the expense of consumers and environment.
I own and operate a business in NZ and frankly what you say is generalised and frankly offensive
Sure I need to make a profit but actually right now its damn difficult - and yes I provide a service, pay rates wages etc etc regardless of profitability -looks a lot like a social conscience to me. But hey if you can do a better job start a business
Agree govt should not be picking winners so get rid of corporate subsidies but actually there are also plenty of costs they impose that dont deliver as well - and they did a good job protecting the supermarket monopolies during Covid
One of Govt's roles is to deal with issues that the market place cannot - their track records with managing monopoly service providers is poor - think allowing 1 supplier for 95% of gib board - so not a lot of evidence that they have the smarts to deal with supermarkets which they are only focusing on because of inflation when the problem has been entrenched for a long time
If I were benevolent dictator I'd raise an LVT on the unimproved value of land and precipitously drop company income taxes. Around 75% of company income tax is borne by employees in the form of lower wages, anyway.
Far better to incentivise and reward productive business entrepreneurs than merely those who squat on land, as we have been doing for the last decades - to the detriment of NZ's productivity and living standards.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.