Labour’s GST policy as predicted by Nats

A109 Light Utility Helicopter flight with mayor Gisborne City from the air in November 2023.

Opinion

Labour has confirmed that it would take GST off fruit and vegetables if it wins the election in October, which will be popular with most people at a time of fast-rising grocery bills but be seen by others as an ineffective way to support households, and something of a doubtful last-chance move from the Government.

The policy to scrap GST on fresh and frozen fruit and vegetables would cost $2 billion in lost revenue, and Labour estimates it would save households about $20 a month.

Seen as the cornerstone of Labour’s wider cost-of-living package, the policy was announced by Prime Minister Chris Hipkins on Sunday.

Having already had the satisfaction of being able to leak the policy and embarrass the Government, National is warning that supermarkets would not pass on the savings but rather would absorb most of it into their bottom line.

Act Party leader David Seymour described it is an act of desperation and made the telling point that it was against the advice of the tax working group set up by the Government. That group found GST exemptions were poorly targeted and that wealthier people benefited from them the same as lower income people.

Hipkins said the reduction in fruit and vegetable prices would make a long-term change to people’s disposal income. He said he would like to do more but was going to support mums and dads, not millionaires.

Finance Minister Grant Robertson has had a change of heart about the policy. In May he said it would be too difficult to exempt food from GST, but he now supports the move.

The focus on GST may have overshadowed another important promise by Hipkins, that the abatement threshold included in the Working for Families system — the amount of income you can earn before it affects your benefit — would be lifted to $50,000 in 2026, which would mean 175,000 families being better off by $47 a week.

That, however, may be too far in the future to have an effect on the coming election.

After poor polling recently, including a fall to just 27.1 percent in the Taxpayers’ Union Curia poll last week, Labour got word out that its internal polling shows a rosier picture.

Recent polls also show NZ First getting over the 5 percent of the vote needed for it to return to Parliament, something that increases the risk of a hung Parliament.

The centre right grouping of National and Act is able to form a majority at present but any dip would see a return to the eternal question of New Zealand politics: “What to do about Winston Peters?”

Labour needs its focus on the cost of living to start paying off and soon.