A GST on fresh foods is bad economics

29th January 2016

Economic modelling reports, both from Treasury and external think tanks, have shown that extending the GST base to include fresh food would negatively impact government revenue, farmers and consumers, especially middle-income families.

The Voice of Horticulture acknowledges the support of the National Party in protecting families and the health budget from extending the GST to include fresh foods.

According to John Dollisson, Director of the Voice of Horticulture “We need to encourage Australians to increase their consumption of healthy fresh fruit and vegetables. Increasing the price by 10 or 15% will not encourage that. ” “A GST on fresh fruit and vegetables would potentially lead to a switch to other snack foods and reduced margins for growers,” he said.

The Voice of Horticulture is an industry organisation representing the vast majority of horticultural businesses from 35 industries within horticulture across Australia. 

Mr. Dollisson stated that “The consumption of fresh fruit and vegetables is the cheapest national health insurance policy available, saving the health budget many times more than revenue generated from a GST on fresh produce.”

It is no secret that families need to have access to fresh foods in the family budget if we are to tackle community health. The Federal Government currently spends millions of dollars on tackling and dealing with the consequences of poor diets. Fresh fruit and vegetable are an essential part of healthy eating.

Several industry representative organisations, representing hundreds of growers, have identified a GST an immediate threat to grower profitability. According to Mr. Dollisson, “Grower concern over a GST on fresh foods is very real. Growers typically operate in a price taking environment and are obviously concerned that any price increase from a GST will ultimately impact on grower returns.”

Growers costs of production have grown whilst labour and energy charges and other input costs have increased, whilst volumes of sales through supermarket have remained sensitive to price. 

Preliminary analysis of CPI data suggests that the price of fresh fruit and vegetables have increased the least of the food basket of commodities over the last 15 years.

Citrus Grower and chair of Citrus Australia, Tania Chapman believes that a GST could significantly threaten horticulture industry growth. “Whilst exporting volumes are steadily increasing we cannot afford a downturn in domestic sales. Growers often operate on wafer thin margins and need improved prices to offset rising costs. A GST is likely to put pressure on farm gate prices which can, in turn, threaten their viability,” she said

The Australian olive oil, almond, avocado and macadamia industries are all forecasting growth of 30 per cent or more over the next 5 years, creating investment opportunities and jobs in regional Australia. According to Lisa Rowntree, chief executive of the Australian Olive Association, “Australian olive oil, has enormous potential but a GST of 15% would impact on families who are now realising the quality of healthy local products.” We want people to eat healthy diets full of Australian grown fresh foods.” “The regressive nature of a GST affects the lower socio-economic groups most and unfortunately this group is prone to greater health problems she said.”

The Voice of Horticulture believes that the effect of a GST on fresh foods is bad economics. It penalises those businesses that supply the basic ingredients that keep the population healthy in favour of pharmaceutical companies and hospitals, largely paid for by the taxpayer.

Media contacts

Tania Chapman
Chair, Voice of Horticulture
0428 291 717

John Dollisson
Director, Voice of Horticulture
0413 111 123

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