Food price rise highlights higher living costs

Food prices fell 1.3% in Auckland but the 6.6% annual rise highlights the higher living costs facing households in the past year, ASB economist Christina Leung says.

The annual rise again prompted the Council of Trade Unions to call for an increase in wages to help families with rising costs.

Green Party co-leader Metiria Turei said high food prices and increased living costs meant it was increasingly hard for the poorest families in New Zealand to make ends meet.

"The result is that hundreds of thousands of New Zealand children go without proper meals and other essentials, and miss out on the start in life they deserve." she said.

Statistics New Zealand figures showed food prices fell last month as the cost of bananas dropped to their lowest level in five years, and tomatoes fell back from their peak in July.

Statistics NZ prices manager Chris Pike said the cost of tomatoes fell 25% in August after soaring to $13 a kilogram in July, while the cost of bananas fell 21% during the month.

Ms Leung said fruit and vegetable prices tended to be volatile from month to month, reflecting the effects of weather on crop yield. The fall in August followed some strong results in recent months.

However, there was an easing in the price of other food categories.

Meat prices fell 0.9% in August, largely reflecting increased discounting in the price of fresh chicken.

Grocery prices also eased on the back of increased discounting of discretionary food items including cheese, cakes and yoghurt.

The price of restaurant and takeaways remained flat in August, she said.

"Given labour costs make up a large proportion of the input costs in this category, and wage growth has been recovering in recent months, it appears restaurants have found it difficult to raise prices in the face of subdued household demand," Ms Leung said.

Four of the five food subgroups recorded price falls during August 2011.

CTU secretary Peter Conway said it was low-income families who spent a higher proportion of their income on food and necessities.

"They bear the brunt of these price rises. They also largely missed out on tax cuts since 2008 which saw the top 10% get tax cuts worth $2.5 billion a year while GST increases forced up the cost of living."

Wages would need to rise to keep up with the cost of living and the Government would need to take the steep rise in prices into account when it reviewed the minimum wage which was already too low. Unions would argue that the minimum wage should be at least $15 an hour, Mr Conway said.

Ms Leung said the easing of food prices in August added to recent inflation indicators which suggested the Reserve Bank had some breathing space on inflation. The ASB, like other banks, expected the OCR to remain at 2.5% at tomorrow's review.




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