Food prices jump again – sharp rise in restaurant food blamed on minimum wage

Food prices were 6.4% higher in April this year than last year, with increases in all food categories measured, according to Stats NZ.

Grocery food prices rose 6.4%; catering and ready-to-eat up 5.3%; fruits and vegetables up 9.4%; meat, poultry and fish up 8.1% and non-alcoholic beverages up 2.8%.

In grocery foods, there was a significant change in the price of cheddar cheese, milk and eggs.

“Food price inflation has generally increased from a low of 0.5% on the year to March 2021,” said consumer prices chief Katrina Dewbery.

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“This follows a period in October 2011 when annual food price inflation was generally below 2.5%.”

On a monthly basis, ready-to-eat and restaurant foods increased, while fruits and vegetables fell.

Restaurant meals recorded the largest monthly increase in more than a decade, at 1.4%. This was mainly due to higher prices for on-site lunches, burgers and coffee.

This coincided with the increase in the minimum wage from $20 to $21.20 an hour on April 1.

Fruit and vegetable prices fell 3.1% month-on-month

Fruit and vegetable prices fell 3.1% month-on-month

“We often see price increases for restaurant meals and ready meals following a minimum wage increase,” Dewbery said.

“Even so, the last time restaurant meals and ready-to-eat foods saw a monthly increase of this magnitude was after the GST was increased to 15% in October 2010, when it there was a 1.9% increase.”

NZ Initiative chief economist Eric Crampton said restaurant meal prices were set by a mix of ingredients, labor and on-site rent.

“The cost of ingredients and labor has increased dramatically; restaurant meals have also become more expensive. Raising the minimum wage won’t have helped, but many restaurants are struggling to find staff even at those wages. In places where restaurants are struggling to find staff at prevailing wages, raising the minimum wage won’t be the most obvious explanation for rising restaurant prices.

This increase was offset by fruits and vegetables, which fell by 3.1% from March 2022 to April 2022, mainly due to lower prices for broccoli, lettuce and kiwifruit.

After removing regular seasonal effects, food prices rose 0.1%. This means that the price increase in the unadjusted series remained unchanged by typical seasonal effects from March to April.

Both supermarket chains have responded to growing concerns over food prices in recent weeks.

The Countdown has introduced a price freeze initiative, holding the price of 600 “essential” items during the winter.

Countdown chief executive Spencer Sonn said the company had received nearly 1,000 requests for cost increases from its suppliers in the past 10 months, more than double the same period the previous year.

On Wednesday, Foodstuffs announced it would cut the price of 110 grocery items by an average of 10%.

Foodstuffs NZ managing director Chris Quin said that across Foodstuffs North Island over the past four months the average number of products with supplier price increases each month has been 3,300, which represents an increase of 357%, compared to the monthly average for the same period over the last three years.

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