July 19, 2021

Nutritious food increasingly unaffordable for many

Options are limited for low-income households whose reliance on takeaways may be a worrying consequence of food price inflation.

Food prices have increased every year since 2016, largely driven by higher prices for vegetables and fruits. With one in five children in New Zealand experiencing moderate to severe food insecurity, higher prices for healthy food means that they may be more susceptible to nutrition related health issues such as obesity.

The food price index (FPI) is a component of the consumer price index (CPI) and is compiled by Statistics New Zealand every month. It measures the changes in prices of individual food items that make up a representative food basket. The FPI currently contains 162 items across five subgroups:

  • Fruit and vegetables
  • Meat, poultry, and fish
  • Grocery food
  • Non-alcoholic beverages
  • Restaurant meals and ready-to-eat food.

Food prices have gone up every year since 2016.

The graph below illustrates annual changes in the FPI and CPI over the past decade. Food prices rose by 2.8 percent between June 2020 and 2021 and have gone up every year since 2016, experiencing sharp increases since the pandemic began. Annual food price inflation exceeded the total inflation rate by 2.6 percentage points in June 2020. Notably, the price of fruit and vegetables increased by 9.6 percent and that of restaurant meals and ready-to-eat food by 4.4 percent in the year to June 2021.

We rarely give much thought to the journey our food takes before it reaches our plates. Food prices are a reflection of several costs incurred during the manufacturing, marketing, packaging, and final distribution of food. Consequently, disruptions to one or more of these stages often leads to price increases. The recent price increases are, in part, a consequence of supply chain snags attributable to the pandemic. A global shipping container shortage has meant that freight costs increased significantly for imported items. In addition to this, border restrictions imposed by the government in response to the pandemic resulted in a shortage of horticultural workers in the country.

In 2019, 17.3 percent of the average household’s weekly budget was spent on food.

As of 2019, the average household in New Zealand spent 17.3 percent of its weekly expenditure on food. The bulk of this amount was spent on grocery food and eating out. Spending on fruit and vegetables and meat, poultry, and fish was under a quarter of total food expenditure.

In 2007, the average household spent 23 percent of its weekly food budget on eating out. By 2019, this had risen to 29 percent. This increase was substituted by a fall in spending on fruit and vegetables, grocery food, and meat, poultry, and fish.

Low-income households are more vulnerable to food price increases than the average household.

According to a survey by the Ministry of Health, one in five children in New Zealand live in a household that experiences moderate to severe food insecurity, which is more prevalent in households with lower gross incomes. Moreover, one in three New Zealanders are obese: the third highest obesity rate in the OECD. One of the key factors that results in obesity is the intake of calorie-rich but nutrient-deficient food, such as takeaways and fizzy drinks.

The persistent increase in food prices, particularly of vegetables, means that there is a severe risk of exacerbating inequalities. The graphs below compare how income decile one households compare to the average household when it comes to spending on fruit and vegetables and ready-to-go food.

Although all households now spend less on fruits and vegetables (by 12.3 percent), the decrease for income decile one households was 18 percent between 2007 and 2019, with a particularly sharp drop post 2016, which is when we start to observe significant increases in food price inflation. Low-income households also significantly reduced spending on grocery food during this period (8.7 percent) compared to the average household (3.8 percent). The reduced spend on the above categories was heavily substituted by restaurant meals and ready-to-go food. In the 12 years between 2007 and 2019, the average household’s weekly spend on takeaways grew by 25.6 percent. In the case of low-income households, it went up by 81.3 percent.

The pandemic has already widened the economic divide between the richest and the poorest members of society. High income earners were able to work from home and less likely to lose their jobs than those who were in low-skilled and low-paying jobs. The New Zealand economy is on the path to a strong post-pandemic recovery but we are still in an unsettled position. It is crucial that the all-important recovery is inclusive and does not lead to worse outcomes for those who are most vulnerable. Although the trends we observed above started to arise pre-pandemic, the recovery period allows us to rethink and reset policy measures to ensure an equitable future for all.