Labour promises to remove GST from fruit and vegetables, boost Working for Families

Labour has confirmed its worst kept election promise - take GST off fresh and frozen fruit and vegetables.

It has also revealed it will increase Working for Families for about 160,000 families.

Leader Chris Hipkins has unveiled the package as part of Labour's "10 point" plan to help New Zealanders with the cost of living, with two more left to announce through the campaign.

There would be no tax cuts or any wealth or capital gains tax under a Labour government, he reiterated, after ruling that out last month.

The 15 percent Goods and Service Tax would be removed from fruit and vegetables from next April, estimated to save households about $4.25 a week, based on an average spend of $32.50.

Watch the Labour announcement here:

Hipkins said food prices were about 10 percent higher in July than the year before, with the price of fruit and vegetables particularly volatile, meaning people were opting for cheaper, less healthy alternatives.

"Inflation is tracking downwards, including food price increases, but food is always a big cost for families - so this is a good policy for today and the future."

While generally a popular policy with the public, it is strongly criticised by economists, tax experts and even Labour ministers themselves in recent times as being hard to implement, and not the most efficient way of helping out low-income New Zealanders.

Hipkins addressed those criticisms straight off the bat: "In the modern world with electronic transactions it's a fairly simple policy to implement".

"Other countries, including Australia, take GST off fruit and vegetables. In fact, most countries that have a form of GST have carve-outs for certain items, and if anything, New Zealand is currently an outlier," he said.

"A lot of the people who oppose these changes aren't the ones worrying about their weekly food bills. This policy is aimed at New Zealanders for whom every dollar at the checkout matters."

The newly established Grocery Commissioner would monitor supermarkets' pricing behaviour "to ensure retailers are passing on the full impact of the GST removal ... and will take action if it's not happening", Hipkins said.

Speaking at a media conference after todays announcement, Hipkins said the police would "benefit all New Zealanders".

He said lower-income New Zealanders spent a higher proportion of their bills on fresh fruit and vege.

"Tax cuts cost a lot more and don't give New Zealanders a lot more," he said.

He said the party at looked closely at where the cost of living was biting, and this was "something we can do that will actually make a difference for them".

Hipkins said that tax experts and economists who had largely panned the plan "were not the people having to take stuff out of their trolley".

The new Grocery Commissioner will ensure that the savings gets passed on from supermarkets to consumers, Hipkins said.

But the National Party leader said the only winners of Labour's new GST cuts are the supermarkets.

Christopher Luxon said it would be retailers that get the savings, not New Zealanders.

He said a National government would change that.

"We think the better approach is to cut out the middle man, to give people genuine tax relief straight into their bank accounts, and in doing so we think the vast majority of New Zealanders will be better off under our plan, and that's the best way that we can support them."

Luxon said there is nothing in Labour's new tax package that will help low and middle-income workers.

Increase to WFF In-Work Tax Credit

Labour would also boost the In-Work Tax Credit by $25 to $97.50 a week from April 2024, which social development spokesperson Carmel Sepuloni said would "deliver targeted meaningful cost of living support to around 160,000 low and medium-income working families".

"We will also lift the Working for Families abatement threshold by more than $5000 to $50,000 from April 1st 2026, to ensure working families keep more when their pay increases or they pick up extra hours," she said.

She said half of those getting Working for Families earned more than $40,000, and "with record wage growth fewer Kiwis have received Working for Families tax credits as their incomes have grown".

"The combined impact of the $25 increases to the In-Work Tax Credit and lifting the abatement rate will see 175,000 households gaining $47 per week on average during the next term of government."

Hipkins said all of these changes were part of Labour's "10-point cost of living package [which] includes free doctor's prescriptions, cheaper childcare and 20 hours free ECE for two-year-olds, free or half price public transport for children and young people and now GST off fruit and vegetables and a $25 boost to Working for Families - and there's more to come".

He took the opportunity to criticise National's plan, saying "the current economic environment means now isn't the time for unfunded and inflationary tax cuts".

"Providing targeted support to cut the costs of the basics for those who need it the most is a better plan and smarter economics."

"New Zealanders now have a clear choice in this election. Huge tax cuts for millionaires and CEOs under National, or relief at the checkout and support for working families under Labour."

Under Labour's broader tax plan, there would be no changes to income tax levels or thresholds, and finance spokesperson Grant Robertson confirmed there would be no wealth or capital gain tax.

Labour would remove "one of the last remaining large Covid-19 economic stimulus measure," he said.

"In March 2020 we reintroduced depreciation for non-residential buildings to support commercial property owners through the pandemic, after it was removed by the previous National Government.

"Removing this will help fund the commitments being made today."

Other initiatives include ongoing work to "ensure that multinationals pay their fair share of tax, particularly in the digital space", signalling a willingness to introduce a digital services tax from July 2025 "if a multilateral solution isn't found in an appropriate period of time".

Robertson said Labour would also return "to the positions of previous National and Labour Governments of making gradual increases in levies and duties and cost-recovery fees for specific areas of government operations if required to account for inflation or new investment".

Hipkins said Labour's full tax policy for the election has been set out today.

"This is the first significant campaign policy announcement that we're making, and there will be more to come," he said.

Examples of how much would people save based on Labour's policy

Couple with one parent working full time on the median wage of $61,997.90 p.a. and one parent working part-time 20-hours on the median wage pro-rated at $30,998.90 p.a. The couple have three children.

GST: $5 extra per week

WFF: $25 extra per week (plus $38 from 2026)

$30 extra in their pocket from 1 April 202

$68 extra from 2026

(Calculated based on a combined household income of $92,996.80 with three children)

Couple with full time jobs, earning $65,000 p.a. and $50,000 p.a. each, with four kids.

GST : About $5 extra per week

WFF: $25 extra per week (plus $38 from 2026)

$30 extra in their pocket from 1 April 2024

$68 extra from 2026

(Calculated based on a combined household income of $115,000 with four children)

Single parent earning $84,000 p.a. in full time work with one child.

GST: $5 extra per week

WFF: $17 extra per week (plus $38 from 2026)

$22 extra in their pocket from 1 April 2024

$60 extra from 2026

(Calculated based on a household income of $84,000 with one child)

Single parent working full time on the median wage of $61,997.90 p.a. with two children

GST: $5 extra per week

WFF: $25 extra per week (plus $38 from 2026)

$30 extra in their pocket from 1 April 2024

$68 extra from 2026