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Experts weigh in on Labour’s cost of living policy

30 August, 2023 

Interviews by Caeden Tipler and Jessica Hopkins, adapted by Arantza Tovar Garcia Corrochano and Ashley-Rose Redstone 

If re-elected to government, Labour would remove GST off fresh and frozen fruits and vegetables. Labour has claimed this would save the average household about $4.25 per week. 

New Zealand Council of Trade Unions President, Richard Wagstaff, told 95bFM's The Wire that this would help with the cost of living, but they would prefer to see a wealth or capital gains tax. 

"Compared to the other opposition parties, this will be better to put food on the table."

"The tax cuts proposed by the other parties really just go to the wealthy." 

Child Poverty Action Group spokesperson, Alan Johnson, said the less than $20 a month in savings is not enough for families. 

“We think it's a nominal gesture to the cost of living crisis and there are better ways of addressing poverty." 

“There are lots of ways of improving the nutritional standards of New Zealanders without resorting to what we believe are ad hoc measures to tinker with the GST system.”

Chief Executive and Principal Economist at Infometrics, Brad Olsen, believes households are unlikely to receive any long-term relief from removing GST off food.

He argued that higher income households who purchase more food are more likely to benefit, than low income households who purchase less. 

“If you take GST off, it’s not likely that the cost of that good remains at the GST exclusive price for very long, and it will likely rise over time as businesses look to capture the amount of money that households are already willing to sell out on food.”

Senior Taxation Lecturer at AUT Ranjana Gupta argued that consumers would bear the cost of businesses adapting to the change.

She said the removal of GST on specific items would be an added cost for companies, who would be required to update their sales systems to avoid penalties by IRD.

“This policy increases the cost directly for the taxpayers rather than decreasing the cost.”

She added that GST exemptions on fruit and vegetables will not guarantee a rise in healthy eating in Aotearoa.

“Australia has had basic food items exempt from GST for 22 years now, the consumption of fruits and veggies have not increased there, health issues have not decreased.”

Labour also plans to increase the Working for Families in-work tax credit, a payment for low-income families in paid work, by $25 a week to $97.50, which they claim would benefit around 160,000 families. They would also widen the eligibility for Working for Families payments, but not until 2026. 

Child Poverty Action Group spokesperson, Susan St John, said Labour’s policies are not enough to meaningfully support low income families. 

“There’s nothing transformational about what Labour has announced. What it is is a bit of tinkering that will have minimal impact on the very people it needs to help the most." 

St John believes expanding the in-work tax credit payment is “extremely harmful” and "discriminatory", as it would only benefit families not already receiving government income support. 

“They should make it that all low income children are treated the same, instead of saying they are deserving or undeserving based on their parents income.”

“It also ignores all the unpaid work people do like looking after children.” 

She argued that the tax credit given to the in-work group should also be given to families receiving income support and that doing this would add at least $72.50 to their income.

St John said they also have an issue with ‘clawbacks’ where 27 cents of Working for Families payments are taken away for every dollar earned over $42,700. St John suggested that the income threshold should be increased to above $50,000. 

Listen to the interviews with Wagstaff, Johnson, Olsen, and Gupta

Listen to the interview with St John

Public Interest Journalism funded through NZ On Air