David Chaston investigates food price increases, does the math and finds a basket of items bought in NZ is in fact cheaper than OZ. Your view?

David Chaston investigates food price increases, does the math and finds a basket of items bought in NZ is in fact cheaper than OZ. Your view?

By David Chaston

Food prices are supposedly rising fast.

According to Statistics NZ, food prices have increased 6.6% over the year to August 2011. This is not only much higher than overall CPI inflation, it also correlates well with what people say they are experiencing when they shop. People "know" food prices are rising quickly and are worried about that pressure on their weekly pay packet. 

But there is some technical scepticism about the ‘basket’ of goods that Statistics NZ monitors. Those who look at this scratch their head and wonder – if that basket does not really reflect an average shopping list, then perhaps real food price inflation is actually even higher?

It is an issue we have wondered about. And we are in a good position to test the matter. 

We have the analysts, we have the time to do it, and we have access to on-line shopping data to source current prices.

It has taken us a number of months to work through the details but the results of this survey have surprised us – what we found is quite different to what we expected. It will no doubt surprise you too – although it is unlikely to count as ‘news’ because it is not ‘bad’.

Popular opinion may be wrong; food prices aren't going up; in fact in our survey they have gone down.

How we survey

To start, we redefined our survey as ‘grocery prices’ – they are still food prices, but now represent a consistent shopping list as used at a supermarket.

Secondly, we used a ‘healthy food’ shopping list prepared by the Healthy Food Guide magazine. Their list was built around a weekly menu plan, and done in conjunction with food nutritionists at Otago University.

There are a number of ‘healthy food’ lists – for families, for couples, and for singles – and we are following the ‘singles’ list on the basis that the larger lists are scaled up versions of it.

You can find the lists, tips, menus and recipes at www.healthyfood.co.nz

Thirdly, we entered this independent shopping list into the Countdown online shopping system, and have been tracking it weekly for the past three months.

Fourthly, we chose the lowest-priced option, mainly choosing store-brand and/or specials when available.

We believe this more accurately reflects how Kiwis actually shop and differs from the Statistics NZ approach. We stuck to the list.

And finally, we realised that as Countdown is owned by Aussie giant Woolworths, we could also check how much that same shopping list would cost in Australia.

What we discovered

1. In the three months we have been tracking food costs, we have not found any grocery price inflation at all yet.

Our weekly monitoring suggests prices are not rising.

True, our sampling is over a relatively short period – and we will continue to track this over the years to come – but the result surprised us. There have been price rises for some items, but there are also price declines for others and, overall, they essentially are cancelling each other out.

You can inspect our list and the pricing tracks in detail here.

We are monitoring another list supplied by a reader – a real list, but not a full one and not one specifically targeted to healthy eating, nor related to an integrated menu plan. And yet, that list also does not show rising prices either. It has been monitored for a longer period, about half a year, and it does not support the ‘rising prices’ narrative either.

2. Prices are cheaper in New Zealand than for exactly the same items in Australia. We were even more surprised by this finding. (You can inspect our detailed pricing comparison here.)

Remember, the list has 15% GST included when bought in NZ and only 10% GST when bought in Australia. That makes the result even more surprising.

It is true that we have had to make some assumptions and adjustments to the Aussie list because it can’t be exactly duplicated. But those changes are set out in the comparison, and in fact turn out to be very minor.

If these are the facts, how come we ‘believe’ otherwise ?

Fact or fiction?

This is the worrying bit – because it might just be evidence that we are whingers. We readily believe negative stories, backed up by noticing price rises in specific cases, and are wilfully blind about positive outcomes.

It also might be that our shopping choices are a) not healthy, or b) include too much eating-out or eating-lazy, or c) are sloppy thinking – usually by comparing the costs of different lists (that is, "this week’s list cost me much more than last week’s list" while ignoring the fact that I bought more items this week).

Notice that our consistent list does not include things like beer, wine, chocolate, or bacon. These are things that would be on many lists. But they don’t have to be to eat healthy. How can you complain about price rises if your basic food choices are crap? You need to live with your choices and pay the costs.

But a healthy food grocery list is not rising in price* and it is cheaper to buy that list in New Zealand than Australia.

Who would have guessed that ? In fact, guessing may lead us to a wrong conclusion.

-------------------

* yet. Remember this is an early result based on only 16 weeks monitoring. Who knows how it might change in the future.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

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I did something like the same excerise recently - all our groceries are bought using a CC (paid back in full at end of the month I hasten to add), Compared to 2 years ago our grocery spend has dropped by close to 15%. One complicating factor is that we now grow something like 80% of our veggies and about 40% of our fruit at home. However by a) only buying on specials, and then bulk buying b) rotating the buys between the 3 different supermarkets as specials come on stream - screw the supermarkets at their own game c) buying fruit and veg from specialist greengrocers d) buying seasonal e) bulk buying at weekends to get the 20c off petrol on a $200 spend when those deals are on, I reckon you can stymie food inflation.

A classic case is cheese - because the supermarkets banged up the price they have tended to have more unsold stuff when the sell buy date comes along as folk wont buy it (cheeses such as brie/camembert etc are best eaten when they are well passed the stupid sell buy dates anyway). Result - pick up cheese in the 'reduced to clear' section at prices which are actually lower than the price was a few years ago.

As for Aussie - I spent 6 weeks in 3 of the Aussie cities at  the end of the last year - I got the clear impression (allowing for currency disparity) that things were clearly more expensive over there.

andy,

 did you shop in Aldi?  *Significantly* cheaper than Coles or Woolworths.  Man on Man, I would love to see that chain come in to NZ and disrupt the cozy duopoly that currently exists in NZ.

No unfortunately not - though I have come across Aldi in the UK - friends of mine over there think they are the best thing ever (there is another chain there called Lidl I think which is similar - also German?). As you say,  it would be great to get them over here so they could fry our duopoly.

Yup, Aldi and Lidl are well known budget stores in Germany.

For what it's worth, our food bill has been increasing steadily and at an accelerated rate over the last 2-3 years.

Here's an interesting thought experiment.  Take an item you buy at the shop.  Think back to when it cost half as much.  How many years ago was that?  Divide that number into 70.  That's the annual increase in price, in percent.  Eg. if chicken breast costs $16 a kg, and you remember that it was half that 15 years ago, then 70/15=4.7% increase per year.

It's a very useful calculation.  Works for everything of course; electricity, yeah that was half the price it is now, about 12 years ago.  70/12=5.8% increase per year.

You can apply it to your income too.  Think back to when your income was half it is now.  How many years ago?  Divide that into 70.  Has your income kept up with the increase in price of the food you're buying?

I have seen the odd thing or two that hasn't increased over time, such as Cadbury chocolate.  I remember when you could buy this for $2.50 on special (King size), about 20 years ago.  Up until a few months back it was still available for $2.50.  So no change according to my purchasing.  Then they went and made them smaller, but the price didn't come down, so at last the price per Gram has gone up.

re Aldi.... You can make a shopping list by checking out

http://www.smartershopping.com.au/browse.aspx

poultry seems sooo expensive....

And they have unit pricing for their food @cost per Kg or cost per 100g....

We pretty much do the same - buy high/regular consumption items in bulk when on special for the nonperishable goods.  I do feel sorry for families that live on very tight budgets, paycheck to paycheck - as this isn't really an option for them and it really does allow for significant savings.  Same goes for growing your own - these's an inital cost to establishing the vege garden, which alot of people just don't have spare in one hit. 

And over the last couple of years, we have seen the disappearance of the $1.00 loaf of bread we used to get in the dairy - and the x2 2litre milks (also a dairy thing) has gone from $5.00 to $6.30 (still cheaper than the supermarkets).  Again, increases that hit low income families quite hard.

My (retired) Dad actually visits the local 2 supermarkets and notes down the dates of say a leg of lamb and goes back the day before (or so) and usually finds that (if it hasnt sold) it is significantly reduced sometimes by 50%.......

Fruit and veg, I get it at the farmer's market, and stick to seasonal its noticably cheaper than the Supermarkets.

Cheese, yep I do the same but I buy little (an occasional  treat) as its bad for the heart....

Aussie, Mum and Dad fly over a few times a year and have noticed over the last decade how OZ prices have gone silly....

regards

David , I am surprised by your finding that food prices are cheaper in NZ than in Oz ... .. because I looked at the table presented , and it appeared to me the other way around .

A basket of groceries cost $NZ 160.98 to $NZ 180.04 in Godzone , but only $A 137.35 in Dingo Deans Land .

..... as you know , ole Gummy is sometimes thicker  than Gerry Brownlee  ... ... meebee you can explain where I've gone wrong .

Tah .

yeah ... maybe not as clear as it could be ... apols
and there is a mistake (ughh!) in the A$ banana comparison - there are "4 each" in AU whereas in NZ it is 1 kg - not exact and in fact favours AU quite a bit on this one, but bananas are very expensive in AU. But does not change the NZ$ equivalent though

The list bought in NZ cost $160.98 (incl 15% GST)
That same list bought in Aust cost A$144.28 (incl 10% GST)
but A$144.28 converted at the FX rate on the day the comparison was made is NZ$180.04

So the list costs NZ$160.98 in NZ, compared with NZ$180.04 in Australia = cheaper in NZ.

Not sure why you're using the exchange rate differential , to make the basket of Ozzie groceries appear more expensive than the Kiwi basket .

.... I could equally argue that the average weekly net ( after tax ) wage in Oz is $NZ 1282 , when in fact it is $A 1028 ... as it is earnt in Oz , not NZ .

As a percentage of the net weekly wage , the Ozzie ( $A 144 / $A 1028 ) spends just 14 % on groceries . The Kiwi spends ( $NZ 161 / $NZ 806 ) 20 % of their net wage on that basket of groceries .

... does GST now apply to food in Australia ?

Im gob smacked at how many ppl in here dont appreciate how to do research.

The classic driver is try and compare apples with apples....so eliminate as many variables as possible....but write down you did.......then it can be peer reviewed and maybe a different methodology worked out....or alternatove conclusions "reached".

So, you make a base comparison to give you a....uh....base....to work off, a starting point.

From that you can do comparisons like, exchange rate, wages differentials....

The point is an apple is an apple....so if its $0.04NZD in NZ and $0.06NZ in OZ then you can start to ask interesting Qs like, why?

Are we being ripped off? are Ozzies? 

etc

etc

regards

Steven I agree with you - For example having spent about a decade in the UK, the cost of living is significantly cheaper than NZ, based in a unit cost, no FX done, simply using a unit value be it GBP or NZD.

You can't use the FX rate when you measure commodities such as foods etc or other utility costs for cost of living basket items, because the incomes do not translate & have not been factored into the equation, which of course they must be if using FX rates on the commodity items. Income % vs out-goings on like for like products must be included, or the measurements are simplistic and inaccurate!

If you want to use FX rates then you need to factor in FX rates on salary's for comparative tested incomes of those who are being analysed.

Let's not try to kid ourselves, NZ is a rip off, always had been, and it's not going to get better its it! Duopolies across industries, might as well be done with it and have monopolies.

Pointless article given its simplistically incomplete measurements!

"Not sure why you're using the exchange rate differential , to make the basket of Ozzie groceries appear more expensive than the Kiwi basket ."

You HAVE to use the exchange rate.  To not do so is absurd.  Think of Japaese Yen...

"... does GST now apply to food in Australia ?"

I believe some items have GST while others don't.

OK then , we'll convert everything into $NZ :

.. In that case the Ocker pays 12 % more for his groceries than the Kiwi does . But he can console himself with the fact that ( expressed in $NZ ) he nets 59 % more than a Kiwi in his salary ....... a better deal than 12 % extra on his celery , methinks !

..... however you slice dice it , the Ozzie spends just 14 % of his net salary on those groceries , the Kiwi spends 20 % of his net income .

By my Gummy " theorem of the increduluous " , that makes the Ozzie 43 % better off than his Kiwi counterpart , on a grocery / salary ratio .

Now you're talking.

It would be interesting to know how other expenses stack up, NZ vs Oz.  We know that, as a portion of income, houses are more expensive in Oz.  Hugh Pav's housing demographics tells us that.  Also, in Oz. they have compulsory super annuation.  How much is that? (I don't know).  I wonder about insurance costs too.  Still, even taking these into account one may well be better off financially in Oz.

About a decade ago I spent some time living on the continent (The Netherlands).  My salary was more then than it is now here in NZ.  Housing was more expensive than in NZ, but I compensated by living in an apartment (substitution at work!).  Strangely, apartments in NZ are not cheap like they are overseas.  Hi-fi, for which I have a soft spot, was much cheaper there than in NZ.  The upshot was I had much more disposable income, to spend on gear that was cheaper than here.  Happy days.  On the other hand, I never found any decent fruit, or meat (except for pork).

Gut instinct, here in NZ we spend quite a large portion of our incomes on food.  Not quite the same level as India, China or third world, but certainly more than first world countries, USA, UK, western Europe.  Plus, as you concluded, Oz.

Martinv

According to Demographia's study the median house rpice in Aus is 7.1 x median income compared to 6.4 in NZ

Adelaide, where I now live, is 7.1 compared to 6.4 in NZ. So house prices aren't cheap here.

But rents are definitely significantly better value here. I paid $550 for a 3 bedroom villa in Remuera, eqivalent properties here in equivalent locations are typically $420-$450. 

Super? here you don't have to make a contribution. But the employer has to pay in 9% of your salary - that's a very nice extra which NZ doesn't provide

Generally most day to day things seem cheaper. Mobile phone plans, telephone / internet accounts etc. And there is IKEA too! Petrol is about $1.35 a litre for unleaded 91 here in Adelaide. Public transport - also way cheaper than Auckland

But look, its horses for course, and depends where you are and individual circumstances etc. I know for me and my family we are definitely better off here financially, but not hugely   

Well, I disagree.  I am one of those (geeks) using Microsoft money to track my spending and our groceries has been steadily increased since 2008.  Used to be $180 per week for a family of 3. In 2011, we were struggling to keep it under $230/week for the same amount of stuffs.

We are now living in Brisbane, not taking the exchange rate into account but buying power.  Our weekly spending has been about $170 at most!  milk and bread is $1 litre/loaf here and fresh veges/fruits are miles cheaper than NZ.  Also they have other cheaper supermarkets here apart from Coles and Woolworth. 

My spreadsheet goes back to 2004 and ive not seen huge increases that ppl complain about....

Apart from that, Im gob smacked at how many ppl in here dont appreciate how to do research.

The classic driver is try and compare apples with apples....so eliminate as many variables as possible....but write down you did.......then it can be peer reviewed and maybe a different methodology worked out....or alternatove conclusions "reached".

So, you make a base comparison to give you a....uh....base....to work off, a starting point.

From that you can do comparisons like, exchange rate, wages differentials....

The point is an apple is an apple....so if its $0.04NZD in NZ and $0.06NZ in OZ then you can start to ask interesting Qs like, why?

Are we being ripped off? are Ozzies? 

etc

etc

regards

Interesting but it might be a more valid comparison if you were to calculate the price per 100gms and maybe use like for like.

For example take the honey.  In NZ you have 250 gms of Arataki compared with 500gms of Home brand honey in Oz.

There are others, look at cheese you are comparing the price of mild in NZ vs Tasty in Oz.

Needs a bit more work.  I see we are being screwed over the price of milk in NZ but we knew that didn't we.  At the moment I can locally buy 2 litres of Anchor in the Indian grocery for $3 vs $4.50 in the supermarket and that's the one where they save you money. Go figure.

won't dwell into this deeply but few examples and my salary is exact the same as I had in Auckland ($X in NZD and same $X in AUD)

Woolworths own brand peanut butter (our favourite) Countdown in Auckland $3.99, here in Aus $2.99

Rice 2kg bag; NZ $4.95,  AUS: $3.49

Butter 500g NZ: $3.99, AUS: $2.49

Ok with exception of bananas NZ:$2.49 AUS: $10.99

fair enough - except on the Woolworth's online lists there was no 250 gm option - the smallest was 500g.

It is a compromise we accepted because we need to automate the lists. Swings and roundabouts. Some minor volumes up, some down.

However, if we get technical, yes we probably should do a gm-for-gm comparison.

btw, no need to buy Anchor - Countdown home brand is much less expensive, as I am sure Pam's is as well. And as you say, dairies can be even better ..

This debate has been going for years, I'm sure.  But in my own experience, I am getting further with my $X salary here in Aus as I was in NZ.  Your comparision table shouldn't take exchange rates between NZD and AUS.  Unless you are a visitor, 99.9% of people living in AUS is getting pay in AUD and not NZ salary, and vice versa.  An average wage buying power comparision would be more meaningful !

Its a sound article by David and well researched , but using the ridicuously high NZ $ distorts the picture resulting in flaws in the comparisons.

For Kiwi's earning Kiwi$ , food in NZ$ terms is getting more expnsive .

It would be far better to use a purchasing power parity formula , and then we would see how we are really being screwed 

We have a Household Eftpos card used only for fresh food , groceries and petrol , and its gone up a lot in the past 28 months, even after deducting the 3% GST increse . Our purchasing  pattern in terms of what we buy has not changed ( in terms product or produce purchased ) in that period . 

We buy pretty basic stuff , ( certainly no champagne or caviar), and we now leave some stuff off the shopping list so we can keep within budget 

Try this for a comparison. Last week at my local Coles supermarket in Melbourne "fair dinkum" Scotch Fillet Steak AUD $49.95 kg . What is the current price in NZ?

Crikey dick! I hope they gave you 8c off per litre of petrol for that price.

Eye Fillet is $44 here in pak-n-save.....the scotch is cheaper still.

regards

The word "fair dinkum" was used because the latest ploy the supermarkets are getting up to is to take rough ends of old rump steak or skirt steak, lay it out, sprinkle food glue all over it, put a chunk of suet in the middle, roll it all up in a round, in glad wrap, wait till the food glue sets, and slice it up so it looks like scotch fillets. If you look close enough you can just see the joins. 

Blimey! Scotch fillet on sale here in Nelson (well Richmond) at Westmeat for $25-30/kg.....

And I picked up a whole eye fillet a few weeks ago at $29/kg; and that was a special in one of the supermarkets.

Scotch fillet listed at Aldi site @ $17.99 AUD/KG tonight...

We believe this more accurately reflects how Kiwis actually shop and differs from the Statistics NZ approach. We stuck to the list. 

From what I can deduce - in your list the person/family is only eating meat for dinner three times a week, no fresh fish and no meat in any of the lunches (although there could be a tunafish sandwich in there).

Speaking of the meat meals - it looks like you get 1-only potato with it and no potatos the rest of the week.

And aside from milk - they drink water - no coffee, tea, milo or juice.

Neither do they use any sugar or flour (although I assume they're doing some baking given some of the other ingredients on the list).

And the kids don't eat packaged cereal for breakfast.

It might be healthy, but I don't know if it's actually how we shop :-).

That said though - it's good to have someone other than stats doing a routine survey.

I reckon I could finish that list off on my own in about 4 days Kate:-p

Thanks David....an interesting piece....well worth doing.....

It broadly matches what I thought was going on.....ie no substantial increases except where branding or monpolistic factors distorted or "allowed" prices to rise....

At present I think there is a huge downward force / price pressure on supermarkets and manufacturers....and yes I noticed that some things are definately more expensive, others are not....swings and roundabouts.

While I also appreciate you can also only do so much in an automated sense what I have noticed is that manufacturers also change ingrediants to cheapen the product.....for instance for tomato sauce dropping the tomatoe content 50% and upping the fructose and salt content....all bad for you but cheaper for them.....and calling it an "improved receipe"...also dropping out cane sugar for crystaline Frutose........100% nasty for your liver....

regards

Wasn't it the food industry that perverted the term 'adding value' to mean adding more of a free or cheaper ingredient like air or water.

I agree with Gummy that you shouldn't be converting the Aus prices to NZ dollars, at least without adjustments

that distorts things, because its not taking account of the higher Aus salaries (especially when they are converted to NZ dollars)

The key issue is buying power, and by converting the Aus grocery price to a $NZ price you are not accounting for this. Its like when overseas people in the mid 2000s called NZ's housing cheap - yes when you converted a $500,000 NZ house to pounds - say about 160,000 pounds back then  - that seemed cheap to the poms. But that calc didn't account for the far lower incomes here   

Far better to conclude, I  believe, that Aus groceries are a bit cheaper than NZ in relative terms

From what I've seen so far here, general household groceries (biscuits, juice, canned veges and fruit, household cleaning items, bread, milk etc) seem a bit cheaper, but meats / fish / yoghurt and a few other things are a bit pricier....BUT if you shop around you can get really good meat deals which essentially negates the more expensive meat prices in Aus  

also, your analysis might show that prices haven't increased much in the last 3 months, and that feels right - but its what happened in the preceding year which I think is where you will find the damage occured

I actually dont agree with you (or GBH) the point is to show the data in a known format with the methodology laid out so you can manipulate the data etc yourself.....

This is one of the key things to real research....its all laid out warts and all.....

Personally I think its quite robust.....and its very interesting that it doesnt agree with NZ Stats data....I'd like to know why not......the OZ angle doesnt matter....its a red herring really....

regards

I don't know why you and David hold the position that these findings don't align with Stats NZ's findings - their findings in terms of the 6% increase are based on analysis over the period of a year, David's survey is only the last 3 months

And Stats NZ clearly state that food prices have fallen in the last month  

I don't really care about the Oz comparison - is a bit of a red herring (but related to income definitely cheaper).

The list does not look unreasonable for a single person (has meat, cheese and other less important things) and I would think that buying the veges seasonally (ie no tomatos in winter) and looking for specials on cheese & meat (as others have pointed out) you could reduce even more.

Well done - look forward to the monthly updates

fortunately we have a broad based middle class here in NZ and we all know that they can be squeezed and sueezed, not just by the duopily supermarketers but by the guys (and gals) in Wellington too...

Seriously and sadly though, bread and milk are becoming a luxury for many New Zealanders! As for cheese... All I can say is at least Fonterra is doing well!

Gummy decided to have one last lash at this basket of groceries thread :

Just three items on the list , add $NZ 18.40 equivalent to the Oz basket total . Dried apricots are 234 % dearer in Oz than NZ ; Brazil nuts are 229 % dearer ; and Fresh Bananas are 188 % up .

These three items are costed at  $NZ 8.67 to the Kiwi shopper , or just 5 % of his total grocery basket . Yet they cost the Aussie $NZ 27.07 , a full 15 % of his basket's total .

.... if I'm living in Oz , I'd probably purchase less of these at those price levels . $NZ 27.07 buys alot more of some other stuff , more basic fruits , vege & carbohydrates .

And where the gosh-darn heck were the Gummy Bears , not sighted on either list !

[ .. thankyou for the inspiration , Amanda ! .. ]

Update for September 26, 2011

NZ list at Countdown went down to NZ$151.79 from NZ$160.98 the previous week.
AU list at Woolworths went down to AU$143.43 from AU$144.28 the previous week.
The exchange rate starts today at NZ$1 = AU$0.7937 compared with AU$0.8012 the previous week.

That all means that buying this list in NZ is now 16.0% less expensive than buying it in Australia, compared with at 10.6% advantage to NZ last week.

Great to see someone challenge the StatsNZ model.  I work in public health nutrition and find the StatsNZ news headlines incredibly frustrating.  Finally an analysis that takes account of specials, homebrands, and seasonality!!  When talking to families these are exactly the kinds of strategies I recommend to keep food costs down.  I look forward to future updates.