Today in Mana in front of a packed audience, Phil Goff announced the Labour policy of zero-rating GST on fresh fruit and veges once we become government next year. The reasons for this policy are two-fold:
- at 15%, GST is no longer a ‘low rate’ consumption tax. This regressive tax will now be at a level where it influences behaviour to the point where many people will be forced to make very difficult economic choices that have the potential to impact upon their health and well-being. We recognise this and want to ensure that fresh fruit and vegetables are affordable to all New Zealanders.
- NZ is now the 3rd fattest country in the world (behind US and Mexico). The cost to the tax payer and the health system of obesity-related disease is around $500m per year. It is time to do something about this.
In New Zealand, 75% of the people earn below the average income, and the cost of living is about to rise for everyone as a result of the increase in GST to 15%. With inflation forecast to be around 4.5% next year, the ability of many kiwis to survive the resulting increases in the cost of living is hugely concerning for us.
GST at 15% will increase the cost of all food, and I do not think it is acceptable that in our country fresh fruit and vegetables start to become luxury items as the increases in the cost of living forces people to make choices that are not in the best interests of the health of themselves and their family.
New Zealanders have to be able to afford to make choices around the type of food they fill their supermarket shopping trolley with. And fresh fruit and vege needs to be at the top of the shopping list, and therefore affordable. A University of Auckland medical school study shows that the price elasticity of healthy food is around 0.85 (i.e. for every 1% drop in price there is almost a 1% increase in purchase). So price mechanisms do work in influencing behaviour – both ways (its the main reason why the govt increased excise tax on tobacco earlier this year).
Let me give you a Napier example of how this policy will help many New Zealanders: the median income in Napier is $23,000. According to the government’s tax calculator, this will deliver an after GST benefit of $3.17 per week in the hand. If a family were to spend only $25 on fresh fruit and veges a week, the 15% GST on this mount is around $3.26. So the cost of the fruit and veges is $21.74 - and the rest is tax. We will put this tax back into the pockets of hard working Kiwis who will really struggle under the weight of increased GST.
If you are wealthy – really wealthy – and earn $1,000,000 per year, you will get about $1,000 in the hand per week extra under the Nat tax cuts on 1st October. In Napier, if you are on the median wage you get $3.17 in the hand per week extra after GST. That’s simply not fair. Labour removing GST from fresh fruit and vegetables is fair. And that is why we are doing it.