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.
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