Food prices rose at an annual rate of 12% last month, the highest annual increase since September 1989.
Statistics NZ says the annual food price increase was due to rises across all the broad food categories it measures.
Compared with February 2022:
- grocery food prices increased by 12%
- fruit and vegetables prices increased by 23%
- restaurant meals and ready-to-eat food prices increased by 8.4%
- meat, poultry and fish prices increased by 9.8%
- non-alcoholic beverage prices increased by 9.1%.
“Increasing prices for barn or cage-raised eggs, potato chips, and cheddar cheese were the largest drivers within grocery food,” Statistics NZ consumer prices manager James Mitchell said.
The second-largest contributor to the annual movement was fruit and vegetables. The increases were seen in tomatoes, 117% increase, and in potatoes 48% increase."
At 12%, the annual food price index is well above the Consumers Price Index (CPI). Statistics NZ's latest annual CPI reading was 7.2% for the December quarter. And Infometrics says the Infometrics-Foodstuffs New Zealand Grocery Supplier Cost Index (GSCI), measuring cost increases from grocery suppliers to supermarkets, rose 10.4% in February. That's up from a 10.0% annual rate in January. The GSCI measures the change in the cost of grocery goods charged by suppliers to the Foodstuffs North Island and South Island cooperatives.
ASB Senor Economist Mark Smith says there appears to be a tangible impact from the summer's North Island storms on retail food prices, and he anticipates further increases over the coming months.
"We expect quarterly rises in food prices to push above 4% in Q1 and Q2 this year, contributing at least 0.7 percentage points to quarterly CPI readings in the first half of this year, with annual CPI inflation potentially hitting fresh 30-year highs in the first half of 2023. The Reserve Bank clearly have more work to do to convince wage and price setters that inflation is on track to settle below 3%," says Smith.
Statistics NZ says month-on-month food prices rose 1.5% in February from January. After adjusting for seasonal effects, they rose 2.1%.
"Fruit and vegetables was the largest contributor to the monthly movement. Within this group, the items having the greatest impact were broccoli, tomatoes, and lettuce," Statistics NZ says.
Meanwhile, Statistics NZ says the extreme weather events in January and February impacted its data collection for the Food Price Index during February.
"Data collection for prices of a small amount of fresh fruit and vegetables was not completed for some weeks in the Auckland and Napier/Hastings regions. A small amount of monthly data was also not collected. For any prices not collected, Stats NZ has imputed these using similar prices from within the same region, which is Stats NZ’s standard treatment for when prices are not available."
149 Comments
Ah, the old 'other places have inflation so the inflation we have here must be the same' approach. Very conveniently lets you overlook the effect of our own RBNZ and decisions made here in terms of regulatory changes relating to the industries now fisting Kiwis (fuel, supermarkets etc).
Which regulatory changes are we talking about. Sure eggs is one (made by National I believe), but eggs make up a very small percentage of the CPI and that is a one off effect.
It doesn't let you overlook the effect of our own RBNZ though, they are as guilty as the rest, they all did the same. But to blame Labour and the left for something that is happening in many right wing countries seems a bit lazy.
What regulatory changes indeed. The government is quite happy to hype an announcement into market studies when it needs good PR but the results are often toothless "wait and sees" and a continued threat of more monitoring from behind a desk in Wellington. I'm sure our supermarkets, fuel outlets and construction companies are positively quivering in their boots at this terrifying prospect.
Yeah, we better vote a National government in. They delivered precisely 0 market studies in 9 years.
Simon Bridges once wrote a letter to the oil companies begging them to lower petrol prices. I'm not joking. https://www.interest.co.nz/sites/default/files/19022015142611-0001.pdf
Ah, the old "lets just ignore we were in a 1 in 100 global pandemic and no-one knew that the best response was going to be" approach.
Frankly I'm glad that the government and RBNZ did what they did, as we now have a very strongly growing economy and low unemployment.
Yes, pity about the house prices, but they were already unsustainable after 9 years of denial from National that we had a housing crisis.
As it is, 1 out of every 11 dwellings in this country have been constructed under this Labour government.
1 out of every 11 dwellings in this country have been built in the last 5 years under this Labour government.
The housing supply shortage that built up under National, when they increased immigration (a policy they did not campaign on) but failed to keep up with infrastructure maintenance is almost erased as a result of the record housing boom under this government.
https://www.interest.co.nz/charts/population/net-long-term-migration
Notice that levelling off before the 2017 election? And then see that big peak just after it?
And what did Labour campaign on?
"Prime Minister-designate Jacinda Ardern was firm last week in stating Labour would be sticking with its own immigration plan of reducing net migration by 20,000 to 30,000, and repeated it in the announcement of Labour's deal with New Zealand First."
Covid did what Labour couldn't and wouldn't do. The borders being shut bailed them out of yet another policy failure.
Devil's advocate here. What piece of legislation dictates how many people Immigration NZ lets into the country?
It was all very public that Labour intended on reducing net migration by 20k to 30k. Why didn't Immigration NZ go ahead with that when Labour were elected?
Maybe it's a case of "don't make promises on behalf of others that cannot be trusted to keep"? Probably performance/KPI bonuses structured around how many people we can cram into the country.
Tell that to all Superannuitants who complain about their Super not being enough to live on. Remember National repealing the smart contributory Superannuation scheme that Labour introduced? Lots of people still suffering everyday because of it. Same goes for National's mother of all budgets. I could go on.
This country is never going to catch up to where we would have been, had Muldoon not scrapped the superannuation fund. https://www.stuff.co.nz/business/money/300327451/the-worst-decision-by-…
And of course, financial wizards Key and English then ensured that history would rhyme by suspending contributions to the superannuation fund.
Those who don't know history are doomed to repeat it. Or vote in another National government.
I’m not sure a super scheme can ever work with fiat currency. The amount of money you would need to save, when factoring in inflation is not even remotely possible. What we need is a really productive economy, and an environment where people can build businesses that grow with inflation. Guess why housing is so popular- rent rises in inflationary times.
The total assets of Australian superannuation funds stand at $3.3 trillion right now.
What we need is a really productive economy, and an environment where people can build businesses that grow with inflation.
Yes, using capital to build businesses. In Australia, superannuation funds are very active in investing their capital in businesses to grow the economy.
Kiwisaver providers in NZ are just starting down that path now.
For someone who constantly claims to be a-political, you are always trying to make honey out of horseshit! It is beyond belief that you ALWAYS defend this government as they are glaringly incompetent! In virtually every metric worth measuring. You will claim balance. More like unbalanced! So what is it you do in IT? Create fake news streams?
NZ is not immune to inflation due to world wide events. I'd suggest it would be a lot lower say in the region 5-6% if it was not for Labour's handling of the economy. That not to say the Nats will do much better either but I don't think they'll be worse than Labour.
If only 6 or 7 house Luxon would get rid of at least 4 or 5 of his houses he'd present a better picture. The interest dis-allowance would then be more palatable to the masses.
I don't do rental properties but I'm in favour of allowing interest rate deductions as a normal business expense.
The difference for me is Luxon is the leader of the National Party so what he owns and proposes as policy is important. I don't follow Willie Jackson other than the odd headline he makes and I doubt whether he came out in favour of allowing interest rate deductions. He is a two bit politician who would unlikely put his head above the parapets knowing the constituency he represents.
Because we have an oligopoly the supermarkets are simply passing the costs through to consumers and their shareholders reap the benefits.
The same is happening in the US. See Richard Reich on YouTube.
This is a complete failure of:
1)ComCom to recommend breaking up the supermarkets
2) Successive governments failing to legislate to make ComCom to give competition greater weight.
With 6 or 7 supermarket chains with equal market share (minimum for perfect competition) including open wholesaling they wouldn’t be passing all the costs through and would absorb some.
New Zealanders are getting screwed over by monopolies and oligopolies left right and centre and successive governments too gutless to act.
With 6 or 7 supermarket chains with equal market share (minimum for perfect competition) including open wholesaling they wouldn’t be passing all the costs through and would absorb some.
You really think Kaufland, Lidl and Aldi would be biting at the bit to get into the NZ mkt? I don't think so.
But Tony Alexander has been telling us every couple of months interest rates have peaked and will soon start falling? There is a real chance even our current OCR track won't be enough to get inflation back under control. Look at what is going on in the US - there is credible people arguing the Fed Funds rate might have to get as high as 6% to control inflation (and hold above current levels until late 2024).
Interesting times.
April is going to be a make or break decision for RBNZ to dent inflation.
Anything less than 50bps and 6 to 6.5 peak rate projection in MPS - inflation is going to be entrenched.
Based on the MPS I would personally decide whether to continue holding NZD or covert to other currency unless the SVB contagion spreads like wild fire.
The food inflation increase is driven by higher prices for eggs and fruit and veg. Egg prices went up due to a supply shortage following regulatory changes. Fruit and veg are up due to the worst summer in decades. How will increasing the OCR make any difference to these drivers, it could make it worse. A lower interest rate would help egg producers and fruit and veg growers to invest and increase capacity. This is a supply issue not an over consumption issue.
Consumption isn’t responding to the supply issues as people have too much money to spend. 30 years ago if eggs went up so much people would change their eating habits, we are too rich to bother now, we just complain while still stocking up the trolley.
A dozen eggs is still worth a tiny fraction of the average rent or mortgage payment
(FYI I know not everyone is so well off, but a lot are).
Expectation: "A lower interest rate would help egg producers and fruit and veg growers to invest and increase capacity."
Reality: "A lower interest rate would help investors and speculators to pump up their property market again."
I think both you and I know this...
QE has nothing to do with printing money, that is just a myth promulgated by our misguided mainstream economists who don't actually understand the subject that they profess to be expert in.
For an accurate description of QE Standard and Poor's have an excellent article titled 'banks cannot and do not lend out reserves' and which can be found online.
The vast quantity of our money is actually created by the banks through their lending as the Bank of England describes in its bulletin titled 'money creation in the modern economy'.
Best that you read what Standard and Poor's say here as they don't think that QE has much effect on anything. https://www.hks.harvard.edu/sites/default/files/centers/mrcbg/programs/…
Did you even read it? The thrust of the argument is that QE doesn’t have a direct “money multiplier” effect.
But they clearly acknowledge that QE does result in additional credit creation, which is exactly in line with my previous statements
Just like any monetary easing, QE, and the supply of excess reserves that it entails, should lead, over time, to more credit creation than would have occurred in the absence of the QE (12). Partly, this is because the easier financial conditions should make borrowers a little bit more willing than otherwise to borrow. Part of the portfolio rebalancing might also involve banks being a little bit more willing than otherwise to lend because they have fewer higher-yielding or longer-duration assets on their balance sheet (as a proportion of their assets and likely in absolute amount, too).
As they say it has a marginal effect on interest rates, not no effect. Nothing like flooding the economy with money through the money multiplier which is what we get from mainstream economists.
As they say here,
"If this theory held, QE, by massively increasing the base of money creation, would lead to an explosion of bank credit Because QE and credit creation do not work this way, it has not".
"Many talk as if banks can "lend out" their reserves, raising concerns that massive excess reserves created by QE could fuel runaway credit creation and inflation in the future. But banks cannot lend their reserves directly to commercial borrowers, so this concern is misplaced".
Here is the problem, you emphatically stated:
QE has nothing to do with printing money
Which is just plain wrong. If you had said: "QE, while adding to the money supply, has less direct impact that many people claim" I wouldn't have disagreed. But you keep trying to claim its not money printing, when it most definitely is, but its just done via manipulating lending conditions to have commercial banks do the actual money printing.
I agree, if anybody is choosing fast food over a home cooked meal then the cost of food is not the problem, it is the ability to budget. Things are definitely more expensive at the checkout, but you can still find ways to eat fairly well and be efficient with your food budget. In fact, the larger the family the more efficient you can be - though that's easier said than done on one or two incomes, it's still possible.
Or a simple fried rice. Cheap and easy way to feed many on a budget. Not an every night meal, but will feed everybody for dinner and lunch the next day too. Best with leftover rice, so I'll often do an easy curry followed by a fried rice.
Pasta another great option. Couple tins of chopped toms, an onion and some butter on the simmer for an hour. Can add herbs if you're feeling fancy, but on a budget it still tastes better than tinned crap. Sauce and pasta for up 5+ family will cost < $10 so the cost is what you add in terms of extra vege or meat. Beats take out hands down.
Could even do your own drumstick KFC. $4/kg for drumsticks, maybe ~$5 worth of flour herbs and spices if you're going hard, $3 six pack of rolls, some potatoes and your own gravy from the meat juice in the pan if you want. How much chicken do you really get from KFC anyway.
Any meal you want for a family should take <1 hour. So unless that hour of work is worth more to you than the $30-40 you'd save by cooking at home then takeout is a bad option. Since we're talking about low incomes, take out is never worth the cost.
Probably the cost of growing veges hasnt gone up so much.
Most tend to remember how to grow stuff and buy cheaper options.. if a recession get bad enough.
As a kid i spent a good deal of time helping out in the garden and an allotment in the uk... was a very tough budget but very healthy few years.
Aussie seems to cope with tax returns that are 400 pages long and almost everyone needing an accountant. I prefer our setup.
Maybe the government should supply us with food, we could pay for it with an excise tax, and then they could cut the tax to help us out. The more you eat the more you save (at someone else's expense of course).
Australia wanted our system because it was so simple. They opted for the political cop-out approach and now have a massive list of what is and isn't food and the GST treatment thereof.
Here's an example:
Italian rolls (that can be cut and filled, are made from bread dough or topped with less than 30% pizza toppings):
Food for human consumption that is not of a kind specified in Schedule 1 of the GST Act. Schedule 1, item 3 of the GST Act does not apply where the rolls are capable of being cut and filled, have a traditional bread dough base or have a topping of less than 30% compared with the depth of the whole product (refer ATO ID 2008/132 effective from 3/10/2008)
No, you're right, this is definitely simpler and more efficient than our system.
Yeah, so don't copy exactly what they did.
Just specify it as fresh fruit and vegetables without any preparations, so bagged salads are excluded. That will take you a very long way to cheaper food without overly complicating systems much.
No, you're right, this is definitely simpler and more efficient than our system.
A claim no one in this thread has made, except you.
and this is where it gets stupid. What is preperation? Cutting the end off for transport (Brocolli)? Bagging (as in a 10kg sack of spuds) Adding a sticker (apples)?
Or as with most fruit picking unripe, then artifically ripening with Ehtelyne, or cold store.
All can be argued as preperation. I don't like GST, but our no-exemptions is the only way to manage.
Further, GST would be removed, then the price would move straight back up within weeks/months, as that is the price the market can bare. Dropping a tax will not make it any cheaper.
Cutting the end off for transport (Brocolli)?
No
Bagging (as in a 10kg sack of spuds)
No
Adding a sticker (apples)?
No
All can be argued as preperation.
Sure, have that argument if you want. Government gets final say.
I don't like GST, but our no-exemptions is the only way to manage.
It's demonstrably proven not to be the "only way to manage".
Further, GST would be removed, then the price would move straight back up within weeks/months, as that is the price the market can bare. Dropping a tax will not make it any cheaper.
Keeping GST on it will not make it any cheaper, either.
Er, no. The thing we are discussing here was my proposal:
Just specify it as fresh fruit and vegetables without any preparations, so bagged salads are excluded.
I had thought my example of "bagged salads are excluded" was enough to get across what I meant by 'preparation' but apparently not.
I am referring to "preparation for consumption". All of the examples you gave were preparation for transportation or sale.
So admittedly the thing that came to mind for me is whether sliced mushrooms cling-wrapped onto a plastic tray would still attract GST whereas whole mushrooms would clearly not. Does mere slicing in that way count as "preparation for consumption"? Probably. But then I also thought, if people want to pay 15% extra for the convenience of mushrooms being sliced - and some single-use plastic - then probably they should be paying extra.
The point of GST isn't to make anything cheaper, so I'm not sure what your point is. Our GST system works exactly as intended. What is missing is the targeted rebate for lower income earners so that they could afford the extra cost for basic household items like fruit or vegetables that was mooted when GST was first bought in.
The cost of simply offering proper support to lower income earners as opposed to a buggers muddle of accomodation supplements, WFFTC and so on is the real problem here. Targeted meaningful benefit and income support is the key, and reforming a simple tax like GST because you won't do the thing you actually need to do can't be justified IMO.
The point of GST isn't to make anything cheaper
Not what I claimed.
so I'm not sure what your point is.
Yes, that's obvious.
The cost of simply offering proper support to lower income earners as opposed to a buggers muddle of accomodation supplements, WFFTC and so on is the real problem here.
Yes, that's why we should have a UBI and also the income insurance scheme Labour were planning to roll out this year but have just paused.
Targeted meaningful benefit and income support is the key, and reforming a simple tax like GST because you won't do the thing you actually need to do can't be justified IMO.
Correct, that is what we need to do instead of monkeying with GST. Until such time as a political party wants to do that however, lets not have the perfect be the enemy of the good. People need help with affording food NOW. Taking GST off only fresh fruit and vegetables will help, and it really is not that complex - I do appreciate the value in the 'slippery slope' argument though.
Also worth noting that when Labour wanted to add GST onto financial services, National branded it as a "kiwisaver tax" and got Labour to drop it. Labour have also just proposed collecting GST from the "contractors" who work for Uber and private AirBnB providers - the whole reason the $60,000 threshold exists for exempting small providers from paying GST is to reduce their overheads, but the "contractors" who work for Uber and private AirBnB providers won't have any overheads if that platform they "contract" to does all of the work for them anyway.
So yes, you might like to say "policy X would be perfect so we shouldn't do policy Y", but actually achieving policy X in reality is difficult, and so policy Y which is much more achievable should be on the table and not just rejected on purity grounds, which is what you are doing.
goodbye labour party,no food security for kiwis, no competition in nz ,commerce commission has looked at everything and done nothing probarly more fleeing kiwis overseas ,crash of the dollar will make things worst,the free money system is over and back to reality.good luck and good bye
“The Left” - whatever the hell that is. I haven’t seen much nationalising of the means of production recently, but I have seen some tired old neoliberal dogma about managing inflation via interest rates and encouraging growth through deregulation. I can’t see any colour difference these days - blue & red seem very purple….
I'd like to dip into my classics for this next number, it's called "We're locked in for stagflation" from my 2021 album 'Hands Up Who Remembers Early 1990s NZ'.
It's just me banging the same drum over and over again, while those in power argue over whether the drum actually exists and whether the fact you can hear one is merely transitory.
I've wondered why people study a Supernova:
"One type, called a “core-collapse” supernova, occurs in the last stage in the life of stars. These stars burn the fuel in their cores....but as a star burns through its fuel forces of pressure drop. When the pressure drops low enough, gravity suddenly takes over and the star collapses in just seconds. This collapse produces the explosion we call a supernova."
Perhaps that's why I have a similar fascination watching A2Milk.
The real kicker in all of this is how alarmist CPI inflation is made out to be, however HPI inflation was celebrated. All I see is a reallocation of funds, this will cause pain so long as budgets tighten between the two, in the long run CPI will take a larger portion of income, and mortgage payments a lower portion at a higher rate.
In both cases someone somewhere along the chain is making money, we can't collectively cry at inflationary CPI while ignoring the negative impact of inflationary HPI.
Here's a clue, HPI benefits the bank, CPI benefits the producer of energy. Invest between the two and there's no reason to complain.
Is food expensive or have we got used to it being so cheap? For example a bus driver earns $30 an hour or $956.71 a week after tax. A couple of bus drivers get $1900. They can buy 290 dozen size 7 eggs a week (3484 eggs). That is quite a lot of protein, enough to feed 100 people with 5 eggs each a day.
Three biggest cost increases for fruit and veg growers during 2022:
- Interest rates: 47% increase during 2022. Growers rely heavily on interest-only and revolving credit loans.
- Fuel: 39% increase in 2022. Diesel prices matter a lot, not just for production but also transport of products and other input goods
- Fertiliser: Up 29% in 2022. Imported fertiliser costs are through the roof (relies on natural gas etc in production)
Now explain to me slowly how RBNZ hiking rates is going to take the pressure of fruit and veg prices?
For one thing, it limits the rate of economic expansion via banks money creation. There are not many tools at their disposal, and complaining about it suggests there is no better ideas. If you had a better idea, you'd be rich. At least $800k p.a. rich
Low interest rates favor the third of the nation with mortgage debt, allowing continued expansion at one end without considering the other two thirds. This would (has) devalue(d) the currency for the whole nation. We are now playing catch up by increasing interest rates, limiting expansion, and sharing the pain. Unfortunately still, lower income earners will be harder hit and it will take time for wages to catch up again. Those caught in the middle, recent FHB.
Considering rates are still stimulatory, lower than inflation, consider being grateful our central bank does not rely solely on the Taylor rule and that each bps below the estimated 8.8% OCR required by that approach is a discount on rates being subsidized by the general public dealing with higher inflation.
the process isnt a smart one:
Ocr goes up.
Mortgagè and other rates rise.
[Some] people have less left to spend after paying the mortgage and loans.
[Those] people are forced to spend less money.
Less stuff and services get bought.
Companies thus make a bit less money from selling stuff and services and thus they hire less people or fire some.. and have excess stuff to sell so cant and dont raise prices
Prices level off ... some think they drop.
Unemployment rises.
Food may still go up a bit.. but some other prices will drop to counter. Overall inflation will drop.
Its a guaranteed result. Just hurts some peeps a lot more than others.
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