Food price increases could be worse, just look overseas

Monday, 20 January 2025

Although it seems expensive at the checkout, we are not the ones doing it the toughest.

Food price inflation in New Zealand was 1.5% in 2024, the seventh lowest in the OECD.

Over 5 years, New Zealand's food price inflation of 4.9% per year was lower than the OECD average.

Geopolitical uncertainty, trade barriers, energy costs, and currency fluctuations could increase food price inflation in 2025.

Food prices increased 1.5% in 2024, but it turns out what we pay at the checkout could be a lot worse when compared with other countries.

Over the past year, New Zealand’s food price inflation of 1.5% was the seventh lowest in the OECD, only higher than Switzerland, Greece, France, Luxembourg, Finland, and Lithuania.

The overall OECD average was 4.3% in November.

Food prices have risen in the past year

Infometrics chief forecaster Gareth Kiernan said the figures hold true over longer time periods, stretching back to pre-Covid, as well.

“New Zealand’s total food price inflation over the last five years has been 27.2%, or an average of 4.9%pa, compared to equivalent figures for the OECD of 41.3% and 7.2%pa,” he said.

Over a four to five year period, New Zealand comes in 10th on the list.

“The other impressive factor when looking over a five-year period is that New Zealand’s exchange rate is a little weaker than it was in late 2019. The lower exchange rate would normally be expected to place some additional upward pressure on tradeable prices, but this pressure has not shown through in terms of faster food price inflation here.”

Foodstuffs NZ managing director Chris Quin.

Looking ahead, geopolitical uncertainty, possible increases in trade barriers, higher energy costs, and the lower New Zealand dollar all shape as upside risks to food price inflation here in 2025, Kiernan said.

“Some forecasters see a small, but temporary, blip up in overall consumer price inflation later this year, and food price inflation could follow a similar path due to some of the cost pressures.

The price for orange kūmara had dropped 59.6% in the past year at Foodstuffs stores.

“Nevertheless, any pick-up in inflation is still expected to be modest relative to the unusually strong inflation seen between 2021 and 2023.”

Foodstuffs NZ managing director Chris Quin said while any rise in food prices was not ideal, New Zealand’s rate was still low compared to most countries overseas, at the start of what could be a challenging year.

“New Zealand heads into 2025 with an average food price inflation rate of around 1% to 1.5%. By comparison, Australia’s FPI rate spent the end of last year hovering around 3%, and the average annual rate for the entire OECD climbed back over 4%.”

Foodstuffs grocery co-ops saw an annual 1% increase in food prices in December. The primary drivers were a 11.2% decrease in produce in the co-ops’ basket, versus a 3.1% rise in meat and fish, and 4% rise in general grocery foods.

Specific foods that saw the biggest annual price decrease included orange kūmara down 59.6%, brown onions, down 44.8%, crown pumpkins, down 40.8% and strawberries down 27.1%.

“We sold over 1.9 million punnets of strawberries in December – easily the most popular produce item sold that month and almost half a million more than in December 2023,” Quin said.

“Our produce experts say overall fruit supply continues to be plentiful and good value as a result, with supply a few weeks’ ahead of schedule for many summer favourites, and new season apples expected in stores over the coming weeks.

“At the same time our transport experts say peak season shipping surcharges are coming down but not as quickly as in previous years, on top of an increase in some port charges, and rail line closures impacting rail services in the upper North Island.”