Hard News by Russell Brown


The GST Punt

It seems fair to speculate that had Labour been in government, rather than opposition, it would not have made a flagship policy of zero-rating fresh fruit and vegetables for GST. It's an Opposition party policy – in that its benefits are potentially outweighed by practical issues, but it has significant power in terms of political branding.

By the same token, National would certainly not have spent so much time and energy frightening the horses over light bulb standards or folate in bread – and would have, at the least, thought a lot longer and harder about rushing in National Standards – had it been enjoying the responsibilities of government. And this move, too, might be politically effective. At the least, it puts some sort of policy behind the "Axe the Tax" slogan Labour toured around the country this year.

Does it have objective merit as policy? As No Right Turn points out (discussion here, where it's re-posted on The Standard) there is a study that found a 12.5% reduction in the price of fruit and vegetables generated an 11% increase in purchasing of those products.

But assuming it is passed on in its entirety to consumers – not a given – a 15% move in fruit and vegetable prices is insignificant in comparison to the seasonal movement in prices, or even the gap between different outlets at any time of year. At my local Fruit World, small heads of broccoli are currently $3.49 (it's all that rain); in three months' time I'll be able to buy one twice the size for 99 cents. It would be interesting to know what effect these regular seasonal movements have on demand.

(It also seems worth noting that the in-season price differential between Grey Lynn Countdown and the Fruit World across the road from it can easily reach 10 times the level of GST. People have far more to gain from shopping wisely than from being relieved of GST.)

The relative simplicity of the policy also means that it's arbitrary. Frozen green peas have at least the nutritional value of fresh peas – and are more affordable at any time of the year for those on limited budgets – but will continue to attract GST. The universality of GST is meant to be its key feature, the thing that broadens the tax base. The world won't end if the principle is diluted, but it shouldn't be idly dismissed either.

There is also to be counted the opportunity cost of the $250 million to $500 million (depending on who you believe) you won't have to spend any more. Might there have been more effective things to do with the money?

But I overheard a conversation yesterday that might warm Phil Goff's heart. In an Auckland CBD convenience store, the guy in front of me was babbling to the owner about how someone was trying to take GST off fruit and vegetables to help people – but they didn't have the votes and those other guys would block it. He wasn't impressed. Labour will be hoping he wasn't alone.


This week's Media7 moves on from our recent show about the Auckland Super City election campaign to look at local body races around the country.

Our panel for the show is Wanganui Chronicle editor Ross pringle (who will have some fairly striking things to say about working in Laws Town); Tom Conroy of Southland's Cue TV; Lani Sowter of Northland's Tautoko FM; and the delightful Joanna McLeod, whose work on the Wellingtonista blog has been putting the Dom Post to shame.

You can discuss these places and more on our local body elections thread, and if you'd care to join us for tomorrow's recording, we'll need you to arrive at the Victoria Street entrance of TVNZ by 5.30pm. Do try and click Reply and drop me a note if you're coming.

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