Robert MacCulloch: Finance Minister Robertson makes a false declaration about the Grocery Commissioner's Powers

In a debate with National Party Finance Spokeswoman Nic Willis, Finance Minister Grant Robertson tried explaining why previously he opposed cutting GST on fruit & veges but now has reversed himself & supports the policy. He stated that the difference is the introduction of a Grocery Commissioner who will "make sure the benefits are passed on".

However, the pass-through depends on the relative sizes of the elasticities of demand & supply for fruit & veges. If demand is highly elastic compared to supply, then even in a competitive market the GST cut will not be passed on & there's nothing the Commissioner can do about it, since it has nothing to do with monopoly powers & collusion.

We've made the point before on DownToEarth.Kiwi when the PM argued that the Commissioner will ensure the 15% cut in GST is passed on. Now the Finance Minister has made the same claim. The PM didn't tell the truth & now the Finance Minister isn't telling the truth .. which just goes to show one thing - this election campaign has been marked by grossly misleading assertions about the effects of all our parties policies on the economy.

Sources
https://www.newshub.co.nz/home/politics/2023/10/election-2023-debate-moments-nicola-willis-confronted-with-national-social-video-of-christopher-luxon-making-questionable-statement.html 

Professor Robert MacCulloch holds the Matthew S. Abel Chair of Macroeconomics at Auckland University. He has previously worked at the Reserve Bank, Oxford University, and the London School of Economics. He runs the blog Down to Earth Kiwi - where this article was sourced.