Labour to cut GST on fresh and frozen fruit and vegetables from April

The Labour Government is promising to scrap GST from fresh and frozen fruit and vegetables from next April – a $2 billion policy which it says will save households about $20 a month.

Prime Minister Chris Hipkins revealed the policy, which is the touchstone of its cost-of-living package, in St Paul’s Anglican Church in Lower Hutt, north of Wellington on Sunday.

The announcement followed more than two weeks of speculation, after National Party deputy leader Nicola Willis claimed she had been leaked a policy to cut the 15% tax on goods and services on fresh fruit and vegetables.

The announcement comes only two months out from the October 14 general election.

Hipkins said cutting GST would make long-term changes to people’s disposable income.

“Would I like to do more? Of course I would,” he said, “but if I’m going to target support I’m going to do mums and dads and not millionaires.”

The package also includes a $25 boost per week to low-income, working families through the Working for Families tax credit system. It was the largest-ever increase, he said, which would affect about 160,000 families.

“The cost of living is the biggest issue facing New Zealanders in this election. Cutting GST from fruit and vegetables and boosting Working for Families will ease the pressure on families as we get through this inflationary cycle,” he said in a statement.

“Other countries, including Australia, take GST off fruit and vegetables. In fact, most countries that have a form of GST have carve-outs for certain items, and if anything, New Zealand is currently an outlier.”

Hipkins said food prices had dropped in July, after rising fast. Fruit and vegetables increased in price by 22.5% in price in a year.

Labour’s policy document said the “last remaining large Covid-19 economic stimulus measure” – depreciation for non-residential buildings to support commercial property owners through the pandemic – would fund the policy.

In May, before the Budget, Robertson said it would be too difficult to exempt food from GST. But, Hipkins said it was a “fairly simple policy” to implement.

Hipkins also promised to lift the Working for Families abatement threshold – the amount of income you can make before it effects your benefit – to $50,000 in 2026. Combined, about 175,000 families will be better off by an average of $47 a week, he said.

“Once fully implemented, low and middle income families with kids will be over $50 a week better off on average, and when you add other components of the package such as 20 hours free early childhood education some families will be saving hundreds of dollars a week.”

Hipkins also took a jibe at National MP Sam Uffindell, who this week made headlines for a remark about doing his family’s grocery shop about once a month to give his wife “a break”. Hipkins said: “I still like to get out and about and do my own shopping and I like to keep an eye on the food prices at the supermarket”, which got some laughs in the crowd.

Grocery commissioner Pierre van Heerden, who the Commerce Commission appointed in July, would be monitoring retailers to ensure they were passing on savings and would “take action” if the sector wasn’t complying.

Speaking after the announcement, Hipkins could not name one economist who supported the policy.

Robertson said the GST announcement and Working for Families Tax Credit changes are the centrepiece of Labour’s tax policy for the election.

There are no changes to income tax levels and no introduction of new taxes such as a Wealth Tax or Capital Gains Tax, he said.

“We have taken the decision that now is not the time for widespread changes to our tax system. Our focus is on doing what we can to support Kiwi families in a tight global economic environment,” Robertson said.

Labour Social Development and Employment Spokesperson Carmel Sepuloni said since Labour introduced Working for Families in 2004, it has been a cornerstone of the Party’s commitment to lifting incomes and supporting families in work.

Free doctor’s prescriptions, cheaper childcare and 20 hours free early childcare education for two-year-olds, free or half price public transport for children and young people are already part of Labour’s cost of living package.

About 200 of the party faithful turned out for the announcement. Spirits were high, and a person in the crowd had even pinned a Labour Party ribbon onto their beanie.

Sepuloni made an address ahead of the announcement, where she welcomed “one of the best finance ministers ever” to the stage, which garnered a big response before Grant Robertson took the podium.