Economist says fruit and vegetable prices still 'flipping expensive' but cost of living challenges starting to ease

A leading economist says there is light at the end of the tunnel with cheaper fruit and vegetable prices slowly returning to the shelves.   

But while that might sound like good news, Infometrics principal economist Brad Olsen added prices are still "flipping expensive".   

Kiwis have been battling a cost-of-living crisis for over two years, with higher inflation and the largest increase in food prices seen since GST was introduced.  

On top of this, New Zealand is on the brink of another recession after gross domestic product fell by 0.3 percent in the third quarter of 2023.   

But there are signs the pressure could slowly be easing on struggling Kiwis, with inflation falling to 4.7 percent in December. It's the first time since September 2021 annual inflation has been below 5 percent. 

The latest data from Stats NZ showed annual food price inflation was 4.8 percent in December and ASB expects this to fall below three percent by mid-2024.  

Olsen told AM on Monday morning there is hope on the horizon for fruit and vegetable lovers with prices set to become a bit more normal this year.   

"I think we're starting to get through some of those big challenges that have persisted over the last two years with higher inflation, which of course has hit everything but in particular we've been seeing food prices in general, getting really expensive," Olsen told AM co-host Melissa Chan-Green.   

Olsen told AM prices stayed high last summer because of supply constraints, expensive fuel and costly fertiliser.  

But, he said recent improvements are allowing the seasonal pattern to come back.   

"In more recent times, we've seen those numbers start to get back a little bit more to normal. Fruit and veg prices fell 6.4 percent in the December quarter," he said.   

"That's fairly normal for that December quarter, but again, we hadn't seen it in a while and that means that overall fruit and vegetable prices in New Zealand at the end of last year, they had increased 3.3 percent.  

"That was the smallest annual increase since COVID-19 hit back in March 2020."  

Infometrics principal economist Brad Olsen.
Infometrics principal economist Brad Olsen. Photo credit: AM

Olsen told AM while he is confident the trend will continue, prices are still 44 percent higher than they were before the pandemic.  

"So good news on one front that they're not going up as much and they're starting to return a little bit to normal seasonal patterns, not so great news that they're still flipping expensive," he said.    

Olsen told AM at the moment there is a skew towards higher prices, particularly with fruit. He pointed to the price of apples being 33 percent higher than they were last year and grapes being more expensive.   

But not everything is expensive with Olsen pointing to a couple of vegetables that were good value for money.   

"The other end of the spectrum, depending on what you're putting on your sandwiches, if you're putting avocado and tomato on, you're probably in a better position. Avocado prices, down, I think 25 percent year on year," Olsen said.   

"Tomatoes down, sort of 41 percent. I was in the supermarket the other day. I could get a punnet of cherry tomatoes for $1.99. You haven't seen those sorts of prices in a while. So again, not everything is all that much better but if you shop around and certainly if you're buying tomatoes at the moment, you're on to a bit of a win and that feels like a slightly better summer than we've had before to me."   

Watch the full interview above.