GST reform: Save money, eat better

[The cost of living is set to increase soon, courtesy of National's policies. Ruth Dyson, our MP for the Port Hills Electorate, is concerned. Here we find out why.]

GST is set to increase to 15 percent at the start of October. Three out of four people in our area are likely to earn below the average income and this will make it hard to bear.

With inflation forecast to be around 5.9 percent next year, the ability of many people to manage the resulting increases in the cost of living concerns me greatly. This is why the Labour Party, if returned to government, is saying they will remove GST from fresh fruit and vegetables. The aim is for people to save money and eat better under this policy.

The Institute of Economic Research estimates around half of all households will end the year worse off than they were a year earlier as rising food prices, the GST increase and other one-off charges swallow up personal tax cuts. GST at 15 percent is increasing the cost of all food. I do not think it is acceptable in a country with the wealth of New Zealand that fresh fruit and vegetables start to become luxury items.

Removing (or zero rating) GST from fresh fruit and vegetables will help people on low and middle incomes make up some of the ground they are losing under National. A family of two adults and two children spends at least $42 a week on fruit and vegetables. They will save about $6 a week, or $300-$400 a year.

It will also save the country money. According to the OECD, we are the third most obese nation in the developed world. The direct cost associated with our love of unhealthy foods is estimated to be over $500 million per year. Eleven percent of New Zealanders will die as a result of obesity-relates illnesses and 26 percent of adults are obese. It is time to do something about these statistics.

A recent internationally-published University of Auckland study focused on the purchase habits of over 1000 Kiwi shoppers. It found that for every 1 percent drop in price in healthy food, the amount bought went up by almost 1 percent. Removing the 15 percent GST off fresh fruit and vegetables will lead to the volume of fresh fruit and vegetables purchased increasing by about 12.75 percent.

We estimate that the loss of tax revenue will be around $250m, which is about the same amount that has been raised by the increase in excise on tobacco.

The scheme's simplicity makes it attractive. To qualify, the goods have to be fruit or vegetables – and they have to be fresh – it's that simple. Evidence from Australia is that it is a relatively straightforward process for retailers, with a small cost initially to implement. Many businesses already deal with zero-rated inputs such as rent, financial services, second hand goods and overseas travel.