Food prices: NZ v Australia

28 June 2017

Some food prices in New Zealand are higher than in Australia due mainly to economies of scale that come with a bigger population base, says FGC. The NZ Herald and Radio NZ asked FGC to comment on claims by ex-pats living in Australia that their food bill was much lower than in New Zealand.

FGC responded:

There are several reasons why some food prices are higher here than in Australia.

To begin with, Australia is more than five times bigger than New Zealand - 4.5 million people compared to 25 million. We’re less than the population of Sydney. That means the economies of scale in Australia are vastly different to ours. They can produce more items for less because they have longer production runs.

As well as that, our imported food has to travel much further than it does to most other countries, so it attracts higher transport costs.

We can also put some of the blame for our high prices on the economic growth in our growing markets in Asia and the East. As the standard of living rises in those countries, our high-quality food exports are in even higher demand, and that puts pressure on prices. Short of introducing our own subsidies, that means we pay more as well. As long as we continue to get premium prices for our highly sought-after goods in those markets, it’s not going to change.

Food companies think very carefully before passing on increased costs, but to a large extent they are at the mercy of factors outside their control.

As for the price of fruit and vegetables, they are high because a very wet autumn has restricted growth and destroyed some crops, leading to shortages.