11 May 2023

Fruit and vegetable costs up 22 percent as annual food price inflation soars

12:05 pm on 11 May 2023
Produce including lettuces and other vegetables stacked in supermarket shelves.

The second-largest contributor to the annual movement was fruit and vegetables (file image). Photo: Unsplash / Eduardo Soares

Food price inflation is at its highest level in 36 years.

Stats NZ's food price index rose 12.5 percent in the year ended April, the highest annual rate since late 1987.

The main drivers over the year were a 14 percent rise in grocery prices, and more than 22 percent for fruit and vegetables prices.

Takeaway and restaurant meals went up by 9 percent, while meat, poultry, and fish prices increased 9.5 percent.

Non-alcoholic beverage prices rose 8 percent.

"Increasing prices for barn or cage-raised eggs, potato chips, and six-pack yoghurt were the largest drivers within grocery food," Stats NZ consumer prices manager James Mitchell said.

"These were the same drivers for grocery food last month."

The second-largest contributor to the annual movement was fruit and vegetables. The increase was driven by tomatoes, avocados, and potatoes.

For the month of April prices edged up 0.5 percent, the smallest monthly rise in five months. After adjusting for seasonal effects, they were up 0.8 percent.

Restaurant meals and ready-to-eat food increased by 1.7 percent and were the largest contributor to the monthly food price increase.

"Higher prices for dining out and takeaway coffee drove the increase in restaurant meals and ready-to-eat food," Mitchell said.

The rise in food prices has been the single biggest contributor to inflation over the past year.

No relief in sight

The Reserve Bank's attempt to get price rises under control via interest rates appears to be working on overall inflation, which fell to below 7 percent in the most recent quarter. But Infometrics principal economic economist Brad Olson said it the food price index "continues to accelerate".

Underlying food price inflation was probably the highest it has been in more than four decades, he added.

"We are seeing really hot and very much sustained food price inflation," he told RNZ's Midday Report.

The last time the food price index rose this much was in the wake of the government's introduction of GST, which added a 10 percent tax to most goods, including food.

"Back in '87, that's when you were seeing the introduction of GST in '86 that was filtering still through into the numbers. And so what we're seeing right here, right now is the most intense food price inflation in terms of underlying actual food price inflation, excluding those government changes, in nearly 40 years - and probably longer if we were to look back."

Much of it was outside of our hands, he said.

"The 22.5 percent annual increase in fruit and vegetable costs for, example, that's weather-related, that's out of out of our hands. And we've seen the devastation that a number of parts of the North Island have suffered this year.

"The challenge, though… is that increase of 14 percent in grocery foods. That does show that there is sort of broad-based and across-the-board increases coming forward."

Some things continued to get more expensive - such as pasta sauce and potato chips - without any obvious cause, like bad weather or the Russian invasion of Ukraine.

"It does, I think, signal worries that there's still a lot of pressure in the system. And this is, of course, an essential cost. This is something that households are having to pay each and every day. And so it is hurting many, many across the country."

ASB senior economist Mark Smith said food price rises remain ingrained and widespread, although it may have peaked.

"Conditions are in place that should see New Zealand food price inflation cool over 2023, but a difficult year lies ahead for New Zealand consumers... the risk is that the current upward momentum in food prices takes longer to slow."

Politicians weigh in

National Party Finance Spokesperson Nicola Willis blamed the increases on the government.

"I will acknowledge that weather events have absolutely contributed to the food price inflation we're seeing, but what we need to do is control the things we can control," she said.

"What are we doing to take costs off farmers, how are we helping food producers have confidence in the future so they plant more crops, what are we doing to make sure they have the workers to plant those crops, to pick those crops? All of those things can help and yes they're small things, but small things added together equals lower prices at the supermarket for Kiwi shoppers."

Finance Minister Grant Robertson said he acknowledged how tough it was on New Zealand families but there were a lot of factors behind the price increases, "particularly when you look at fruit and vegetables where the weather has had an enormous impact on costs there; the broader supply chain challenges".

"That's exactly why the government has stepped up and supported particularly low and middle income New Zealanders, superannuitants, with what we've done. We are doing our best on what is a very challenging environment to support people."

He expected the increases to slow down.

"In fact, month by month you are starting to see signs of that - but obviously the annual number reflects what's been a really tough year for New Zealanders."

Green Party co-leader Marama Davidson said it could not be left to charities to shoulder the burden.

"What we know is that charity food giveouts shouldn't be the solution. We can actually increase people's incomes in the very first place so they've got some say over their lives."

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