Inflationary pressure not over, food prices to rise in 2023 - economist Brad Olsen

Inflationary pressure is not over and food prices will rise this year, which will hit Kiwis hard in the back pocket, an independent economist is warning.

New figures out on Monday show cost increases from grocery suppliers to supermarkets have plateaued but remain at record levels. 

The Infometrics-Foodstuffs New Zealand Grocery Supplier Cost Index (GSCI) shows a 10 percent rise in January, which is slightly down from the 10.6 percent recorded in December.

Independent economist Brad Olsen told AM Early on Monday the wild weather hitting the upper North Island is making it challenging for growers. 

"We know those input costs are continuing to be under a lot of pressure. Of course, the weather recently hasn't been fantastic for produce growers and we're expecting there will be further increases coming forward," Olsen told AM Early host Oriini Kaipara. 

"Even before the original Auckland floods and certainly before the cyclone, we'd seen the likes of onion and potato prices up around 36 percent over the last year. Given how many were rolling around after getting washed out in Pukekohe, you'd expect to see even further cost increases."

The news doesn't get any better for Kiwis, with Olsen saying despite the plateau in supply costs, he expects food prices to rise later this year. 

"We haven't seen the end of it yet, but with these figures, we are seeing that supply costs at present have been in a holding pattern over the summer period," he said. 

"We weren't expecting them to jump up quite a lot, but early indications are as we get further into 2023, we're not through those inflationary pressures yet and we do expect food costs will continue to increase."

But Olsen said there are signs "better things are to come" with overseas prices starting to decrease. 

"Shipping costs, for example, are down 77 percent over the last year. They've come back a lot closer towards more normal prices, so bringing goods back into New Zealand has started to improve," Olsen explained. 

"We know fuel costs as well, while still being 12-13 percent above where they were a year ago, they're also quite a bit lower than what we saw throughout most of last year after the Russian invasion of Ukraine." 

Despite prices dropping, Olsen said we aren't through the worst of it yet. 

"We know international food prices haven't come back, but they have started to stabilise at a certain level," he said.

"We're hopeful those trends of stabilisation might come through here to New Zealand, but there is still a lot of pressure coming through the supply chain." 

Independent economist Brad Olsen.
Independent economist Brad Olsen. Photo credit: AM

Olsen told AM it's "incredibly challenging" times for supplies as there are issues across the board, which is leading to high food prices. 

"We know food prices at the moment have been rising at the fastest pace in 32 years, these are sort of unprecedented times when it comes to those inflationary pressures," Olsen said. 

"These are the essentials, these aren't nice to haves, these are putting food on the table and I guess the challenge that we see for a number of our producers is that this isn't sort of any-one area challenge or problem - it's across the board."

Watch the full interview with Brad Olsen above.