The rate of goods and service tax (GST) rose from 12.5 percent to 15.0 percent on 1 October 2010. Lifting GST to 15 percent could increase retail prices of goods and services that are subject to GST by 2.22 percent. For example, a product priced at $100 excluding GST would have sold for $112.50 before 1 October. With GST increased to 15 percent, that product would retail for $115 (all other things being equal), giving an increase of 2.2 percent.
This article analyses prices collected for individual products for the food price index (FPI) and the wider consumers price index (CPI) during the months following the increase. For the FPI, over 10,000 prices are collected each month, from about 650 outlets in 15 urban areas. In addition, about 6,000 prices for non-food groceries and other products are also collected monthly. These include alcoholic beverages and tobacco, toiletries, and household cleaning products. Other prices collected from retail outlets by Statistics NZ's price collectors during the middle of the quarter, such as electronic goods, appliances, hardware, and clothing, and prices collected by postal questionnaire, are also included.
In October 2010, nearly one in four of the food prices collected monthly rose by more than 2.0 percent but not more than 2.5 percent (in line with the GST rise). Once prices affected by discounting and the removal of discounting are excluded, two in every five food prices rose by 2.0 to 2.5 percent, with one in two grocery food prices rising by 2.0 to 2.5 percent. Three in five restaurant meal and ready-to-eat food prices remained unchanged. Similarly, over two in five alcoholic beverage prices remained unchanged, which was affected by the number of prices collected at licensed premises and restaurants.
However, in November and December 2010, almost no prices rose by more than 2.0 percent but not more than 2.5 percent, and half the food prices remained unchanged. The proportion of prices that remain unchanged rises dramatically once the impact of discounting is removed - to four of every five prices. This indicates that the impact of the GST rise was largely seen in the October 2011 month.
Food prices rose by 2.2 percent in October 2010, and fell by 0.6 percent and 0.8 percent in November and December, respectively.
Of the prices collected from retail outlets by Statistics NZ's price collectors during the middle of the quarter (that is, not including the monthly collection), one in ten prices rose by 2.0 to 2.5 percent (in line with the GST rise), one in four rose more than 2.5 percent, and nearly one in two remained unchanged. Of prices collected by postal survey, one in ten prices rose by not more than 2.0 percent, about one in five prices rose 2.0 to 2.5 percent, one-third rose by more than 2.5 percent, and about one-third recorded no change.
Consumer prices rose by 2.3 percent in the December 2010 quarter.
Four analytical tables (available in the 'Available files' section of this article) show the percentages of prices collected that fell, recorded no change, or rose. For prices that rose, these are further grouped according to the size of the increase. Tables are available for:
- prices collected in mid-November for the December 2010 quarter CPI – for prices collected by postal questionnaire and prices collected from retail outlets
- prices collected in each of October, November, and December 2010 – for the food group, food subgroups, and selected non-food categories.
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