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Healthy Diets and GST

August 30, 2008

The issue of GST in food seems to be a periennal one, so I thought I’d kick off a conversation about why it’s such a furphy.

To begin, yes, 12.5% of any shopping bill might be made up of tax, and the poor will pay more tax proportionally than the rich because their spending on food is proportionally higher. But I think that removing GST won’t make things that much easier for people on low incomes, and it won’t make our frugal middle-income people that much better off.

A truism I learned years ago is that people’s spending tends to expand to fit their incomes. If you make $500 in the hand per week and it jumps to $550, then your spending tends to expand to meet it. Suddenly you can afford an extra channel on Sky, or you can afford cheese again. The person who pointed this out to me stated that he’d seen people routinely upgrade their cars and houses as their incomes grew over time (I was a student, and he was an ex-insurance salesman who’d “retired” and opened a cafe, which he ran remarkably like an insurance saleman who knew nothing about food, service, or lunch-hour rushes). He noted that as people’s incomes changed over their lifetimes their expectations of ‘normal’ changed, so once they got to or near retirement age they kind of ‘freaked’ at the necessary change in spending. I said I’d have to wait and see.

Now it is fairly sensible; if you have more money, you tend to spend more money. You don’t have to be a genius to see that. And this always leads me to believe that if you remove GST, people will just have a little more money available to… not be able to afford the stuff they want.

So in keeping with the kaupapa frugal, I’d like to remind myself that the best way to make the most out of a limited budget is to make good choices. Removing GST would mean that I could have up to 12.5% more in my food budget. This is because lots of things you can buy at the supermarket wouldn’t be GST exempt, booze and tobacco being notable examples. Nor magazines. Nor Gadgets and/or widgets. And of these things booze and baccy are two that people on lower incomes tend to consume large amounts of both. My own anecdotal experience is that this tendency holds up.

Now it’s hard for me to know exactly how much the average family spends on groceries. If anyone has a reliable source of info Frugal Me would love to know it (whatever the NZ Herald uses is mostly bullshit).

Here I live in a two-adult household and we spend about $150 per week on everything (and per person that’s double what I lived on in Melbourne in my low-income job). The reason we live so cheaply is that we don’t pay other people to make things for us. Example? Pre-made pasta sauces. You’re paying someone to make something you could do yourself with tomatoes, onions, garlic and herbs. To prove that I’ll try and rustle up some comparative prices in the next few weeks.

Anecdotal evidence is that that when times get tough that people cut out of their diets is fresh and fruit and vegetables; exactly the stuff they shouldn’t be. The argument that we should remove GST from foods suggests that people will change their normal behaviour and continue to buy fresh items as prices increase.

But… I fail to see the reasoning behind that. If people buy less fruit and vege when prices increase, then the prices of all food products will be increasing. No GST would only mean that the substitution of goods takes place at slightly lower prices. And, because people’s spending matches their incomes, they’re probably living near the edge of their budgets anyhow.

And I note I’m wandering into economics, which I’m not very good at. So to be blunt, if people are making bad choices then making food items slightly cheaper won’t help them. It might mean a small amount more fresh food is consumed, but I’d have to assume that “bad” foods will also increase proportionally.

Comments, clarifications, and suggestions welcomed. If not only to clear out any assumptions with, you know, facts.

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20 comments

  1. This from Otago University is good for food costs:

    http://nutrition.otago.ac.nz/consultancy/foodcostsurvey

    The PDF on that page is worth viewing too.

    “we spend about $150 per week on everything”

    Everything being what? Does that include alcohol and tobacco? Dish liquid, washing powder, shampoo?

    “So to be blunt, if people are making bad choices then making food items slightly cheaper won’t help them. It might mean a small amount more fresh food is consumed, but I’d have to assume that “bad” foods will also increase proportionally.”

    That arguments only makes sense if you know how many people make ‘bad’ choices (we’d have to define what bad means too). For someone like me who makes good choices and who is on a low income, 12.5% would be most welcome.

    I also think that if we want to educate people to make good choices then we have to give people the means to afford that (that applies to low income people, everyone else can already afford to make good choices). Although I agree that the reasons for not making good choices are not all financial, which makes the whole thing very complex.


  2. Wow, those Otago costs freak me out. I feel that we eat a very balanced, healthy diet with the odd treat in our house, yet we barely spend the “Basic” amount.

    Only one of us eats meat, and only cheap cuts, two or three times a week, and I rarely buy fish because of my worries about over-fishing, but that can’t account for all it.

    There are some bizarre things in that Otago food breakdown too. 400g of sugar per week? How can anyone eat 400g of sugar a week? I would have to bake or make dessert several times a week, and eat it all myself, to manage that.


  3. i’d guess the 400g is included in other foods, or added to drinks.

    most processed foods have sucrose in.


  4. I wondered about that – but that’s a lot of sugar in your tea, even over a week. And it can’t be the sugar in processed foods, because that’s not a separate grocery item. Hmmm.


  5. We are a family of 2 adults and 3 small children (5 and under) At the start of the year we could stretch $150 a week for EVERYTHING now its getting up to near $200 as prices rise and children grow. I try and avoid processed and ‘ready made’ foods (eg pasta sauces) and I buy fruit and vege at the weekend market. Sometimes I barter for things – I fixed a computer problem recently for some organic beef. I’d like to barter more. I have a big veggie garden currently over run with more leafy greens than I can use for example.

    I don’t think a GST change would make much difference to us in the long run


  6. Most people I know would eat that amount of sugar in a week. That’s assuming sugar in all foods – biscuits, cakes, ice-cream, tea, bread, pizza bases, sauces, canned goods, jam, peanut butter, marmite, anything you can find in a supermarket to drink apart from water etc.

    I don’t know how OU calculated that 400gm amount, but I’m guessing it’s either buying sugar and cooking with it, or buying goods with sugar in them, or a mix.

    A quick search online shows in the US the weekly sugar consumption is over 1kg, so the 400gms for NZ is probably not too far off. Although given the costs are from a nutrition department you’d have to wonder why they think 400gms sugar is considered neccessary. It’s a big part of the increasing diabetes rate.

    I also found this, which says the ration of sugar during the war was limited to 12oz per person per week. That’s 340 gms 😉

    http://www.nzetc.org/tm/scholarly/tei-WH2Econ-c17-33.html


  7. I think if you’re feeding 5 people healthily off $200 you’re doing OK and deserve to feel good about your budgeting skills, judging by that Otago survey. That would put you at their “basic” level.


  8. weka: ok, I’m beginning to accept that I must have some cranky notions about “normal” eating then… but still. If you look at the PDF, they already have line items for cereals, spreads, Milo and so on, so “sugar” really does seem to be a separate thing.

    Perhaps my minimal sugar consumption is the secret to my marvellous *cough* physique 🙂


  9. I’d like to barter more

    are there currently any sites for wellingtonians to do that?

    would be useful and interesting. i’ve always got “crap” i’d willingly trade to someone who thinks it’s “gold”


  10. So to be blunt, if people are making bad choices then making food items slightly cheaper won’t help them. It might mean a small amount more fresh food is consumed, but I’d have to assume that “bad” foods will also increase proportionally.

    A good example of how taking GST off ‘good foods’ wouldn’t make much difference at all is just thinking about the last time you went to the supermarket and bought some fruit or vege. If that product was 1/9th cheaper would you have bought more and more importantly would you have not bought something else? Likewise would you have not bought that last ‘bad food’ you bought (mine was 2 Magnum icecreams) if fruit and vege were 1/9th cheaper than they were?


  11. Stephen, the OU charts are pretty unclear about what they’re measuring. But people do eat alot of sugar, and many people aren’t aware of how many foods contain sugar eg breads, so they are often eating more than they think.

    I grew up having pudding every night. Often this was something mum or dad cooked (choc sponge pud!), or if they were too busy it was ice cream and fruit, or jelly, or instant custard. Do families still do that pudding after dinner thing every night?


  12. Interesting. I too grew up in a family where pudding was routine. It often was ice cream and stewed fruit, just as in your house. Sometime in my teenage years this stopped being routine, but I don’t know why.

    It’s not a habit we’ve continued – pudding is definitely a treat. And yeah, self-saucing chocolate fudge pudding, a la Alison Holst, is a perennial winner.


  13. Weka – we only do pudding a couple of nights a week (if that).

    Che – I haven’t found any barter sites although I do use freecycle to give away and find useful stuff.


  14. Actually, I do know why it stopped. My mother went back to work, and the time available for arranging a two-course meal disappeared. Which is probably why it’s not something I do regularly either – I work full time, and I’m the household cook too.


  15. That ‘sugar’ amount is amazing.

    But I recall that when I was a lass, my mother had two big buckets under the bench, one for flour, and one for sugar. Me? I buy much less sugar, and about all it goes into is baking for the girls’ school lunches. I prefer to do my own baking; not only is it cheaper, but it’s good honest fats and sugar that I have put in my self, so I know what they have been eating.

    So where was Mum using it? In desserts, I think, every night. My girls are lucky to get cooked dessert once a week; usually it’s just (!) fresh fruit.


  16. Selectively removing GST from things is a nightmare. I was in Aus when the GST came in and basically everything becomes an argument over what’s a “necessity”.

    Loaf of bread: no GST. Bread with icing on top (i.e. a sally lun): GST.

    Chicken in one piece: no GST. Chicken in more than one piece: GST (side effect, suddenly you can buy an almost decent whole roast chicken meal sans GST from fast food chicken places)

    Tampons: GST (huh?)

    And on it goes. The average Australian weekly shop now contains an essentially random GST component, which shouldn’t be how taxes are levied.


  17. I haven’t found any barter sites although I do use freecycle to give away and find useful stuff.

    I can second that. Very useful indeed, and a great ethos.


  18. Bartering: an exchange market is being set up in Newtown, can forward details to anybody interested or get the organisers to get in touch. They might have a table at Knack market in berhampore Saturday week, for those who live in the area – haven’t heard back from them yet.

    Am also a bit freaked out by the Otago study. We spend much less than that and have no qualms eating meat, fish, plenty of veges. What we do do, and it’s been mentioned quite a lot in comments on various threads, is do our own cooking and prepare a lot of things from scratch. Bread being by far the thing that saves us the most moola. The problem there is that while the preparations are very simple, and great for involving the kids (esp. the little vege garden and pizza/bread), they are much harder to attend to if you work a 40 hour week out of the house. My partner and I are lucky in that she works part time and I work from home, so we can often do some relay cooking, as it were, but that’s very much a middle class, workflex privilege (thinking of a couple of comments in this vein in the Why Be Frugal thread here).

    I wonder too if the Otago study is based on the British idea of home cooking. Mediterranean dishes are a lot cheaper to prepare and Asian/Pacific cuisine might be too.


  19. I’m studying Nutrition at Otago so will ask the dept what the rationale for sugar quantity etc. is… Still wondering what the ‘$150 per week for everything’ is – did I miss the explanation?


  20. I just went and had more of a squizz at the info pack – the sugar is the amount included in all products that would be consumed over the week (including processed foods, any biscuits, baking, ice cream etc.). They have used the food groups discussed in the Food & Nutrition Guidelines (e.g. breads & cereals, fruits & vege, protein sources, dairy products) to determine a balanced diet for the average person per week, then done a breakdown of the foods themselves to determine how much of the basic purchasable constituents would be required to make these up (I think the milo is included as a commonly consumed caffeine free hot beverage). So the 400g for an adult man would be spread amongst all foods containing added sugar (as well as discretionary intake such as in cuppas). It might seem like a large amount, but processed foods do contain a lot more sugar than many people realise and many NZers think nothing of including cheap ready made items in their grocery baskets (as is evidenced by the food item suggestions included in the report). If you’re baking cakes muffins, biscuits or muesli bars at home, many recipes include around a cup of sugar or equivalents (approx 250g) per recipe.

    I do think that where many of the commenter’s savings are being made is via the ‘making from scratch’ ethos. The Otago study will be coming from the standpoint that this behaviour is not the norm in contemporary NZ society. Indeed, they refer to the Basic category as one in which people prepare all food at home, yet the shopping suggestions for meeting the budget in this category still includes bought crackers & biscuits, ice cream, basic pasta sauce etc. I don’t see anything particularly ‘disturbing’ in this, just that the study aims to reflect patterns of food consumption as they currently exist across NZ society. Also, for Nutritionists & Dietitians to make effective recommendations and suggestions about food related spending, recognition and accommodation of these habits is more effective than issuing instructions that someone who’s never baked in their life (and doesn’t have the time to either) should start making all their own bread and bikkies in order to be able to eat affordably.

    Phew!



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