29 Jun 2015

Inflated milk price claim rejected

2:16 pm on 29 June 2015

Claims by the Labour Party of inflated milk prices have been rubbished by a sector group and academic who say the party's figures are not telling the whole story.

Labour says New Zealand consumers are being milked as the global price of the commodity falls.

Milk at Pak n Save Kilbirnie.

Photo: RNZ / Alexander Robertson

The party's consumer affairs' spokesman David Shearer said while international dairy prices were dropping, the price of milk on the shop shelf had risen.

He cited Statistics New Zealand figures showing the average New Zealand price of two litres of milk in May 2013 was $3.19, compared to about $3.45 in May this year, an increase of about 26 cents or 8 percent.

Taking a starting point of May 2010, however, the cost of a two litre bottle of milk has risen just 9 cents in five years, from $3.36 to $3.45 this year. That equates to a 2.6 percent increase over the period, well below the level of inflation at 8.6 percent.

But at its most expensive in those five years - in May 2011 - the price was $3.67. That equates to a 9.2 percent increase above the rate of inflation. In the same year, the price of milk came under considerable scrutiny and Fonterra froze the domestic wholesale price of milk for most of the year.

Mr Shearer also pointed to lower milk prices in Australia and the United Kingdom than those in New Zealand.

Compared to $3.45 for two litres of milk in New Zealand, Australians paid $NZ2.47, and two litres sold for $NZ1.90 in the UK, he said.

"Someone is making money along the line and it is hurting New Zealand consumers," he said.

Mr Shearer said it was ironic that Coca-Cola was currently more affordable than milk.

"Obviously New Zealanders are being ripped off. The milk price internationally has halved. Farmers' milk prices have halved and yet our milk prices keep on going up," he said.

He said the Government must ensure that milk prices were fair.

Jacqueline Rowarth, a professor of agribusiness at Waikato University, said the party's claim about retail milk prices overseas was unfair because it failed to take into account other taxes consumers pay in those countries.

"We pay overall a very low tax rate on our personal income in comparison with most other countries and we don't subsidise our farmers but we do pay GST on fresh food, whereas Europe pays a value-added tax and it's only on processed food."

The head of the Dairy Companies Association, Kimberley Crewther, said the price of milk had been very stable over the past five years.

"New Zealand consumers have not had milk prices increase at the same extent as peaking in the international market, and therefore you can't expect that the prices will decrease along with prices in the international market either."

Fonterra said it did not set the price of milk at supermarkets. It was responsible for the wholesale price of milk and that was affected not only by international commodity prices but by other costs as well, such as taxes and the cost of transport and compliance.

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