Auckland fruit and veg prices to jump with regional fuel tax: Horticulture NZ

Monday, 7 May 2018

Regional fuel tax ripple effects could impact the price of fresh fruit and vegetables, Horticulture New Zealand says. 

The Land Transport Management (Regional Fuel Tax) Amendment Bill is currently making its way through parliament, having had its first reading in March. 

This legislation would allow Auckland Council to levy petrol and diesel sales by 11.5c per litre and is expected to be implemented by July 1. 

Horticulture NZ chief executive Mike Chapman said in principle it agreed with the measures being taken to reduce congestion in Auckland, but it believed there would be 'unintended consequences' of the bill as it stood.

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'These could include increases to the prices of healthy, fresh fruit and vegetables,' Chapman said. 

In a written submission to the Finance and Expenditure Select Committee, the agriculture industry group requested off-road vehicles and machinery used in farming practices be provided with an exception from the RFT. This was endorsed and supported by a further 18 organisations.

'The reality is, these vehicles do not use the road system and therefore, should not be taxed to pay for the roads they do not use.' 

Auckland-based growers would be disadvantaged if they had to absorb RFT costs and growers in other parts of New Zealand did not, he said.  

'The focus of the bill appears to be on revenue collection and not on road use behaviour change; we submit that tolls are more likely to change behaviour and are a more fair system, offering choice.'

Minister of Transport Phil Twyford said it was his intention regulations be passed to enable rebates to be claimed for dedicated off-road vehicles, including fuel used by horticulturists and farmers.

'I welcome the support of the regional fuel tax from Horticulture NZ and note their view that Auckland's clogged infrastructure adds significant cost to the distribution of fresh fruit and vegetables,' he said. 

The trucking industry had complained it could only do two deliveries in Auckland when it used to do five a day, which was pushing up the price of fruit and vegetables not only in the city but throughout the country, Twyford said.

The RFT is yet to be finalised and is still going through the parliamentary process, with the bills second reading expected in early June, he said. 

New Zealand Institute of Economic Research (NZIER) principal economist Christina Leung said the fuel tax could potentially raise prices given the increased costs of production and transportation. 

The extent to which prices increased would depend on how easy it was for producers and retailers to pass on increased costs, Leung said. 

'Our food exporters are nearly all price-takers, which means the world price sets New Zealand's price,' she said. 

NZIER's Quarterly Survey of Business Opinions found many businesses were finding it increasingly difficult to pass on cost increases fully in the form of higher prices, she said. 

'While it is difficult to know how the Government will respond to the suggestion of exemptions, generally the more exemptions you have the more administrative burden and complications the tax policy will carry, so if the Government was to stick to best practice tax policy of broad-based low rate then exemptions are unlikely'