Other ways to make healthy food cheaper need to be found after a bid to remove GST from those products failed, health lobbyists say.
Maori Party MP Rahui Katene's member's bill to remove GST from healthy food was defeated 64-56 on its first reading in Parliament last night.
Public Health Association (PHA) head Dr Gay Keating said if the Government needed to take some steps to make nutritious food cheaper.
"If the Government won't look at removing GST from the basics, it must examine other ways of making it cheaper and easier for people to maintain their basic health. This will inevitably save money because healthy people aren't repeatedly admitted to hospital at taxpayers' expense."
Health Ministry research showed members of about a fifth of homes, particularly low income, Maori and Pacific households, regularly did not have enough nutritious food to eat.
"If children do not get enough nutrition it can put their entire development at risk."
Nutrition Action (ANA) executive director Nicola Chilcott suggested the Government consider an electronic Smartcard - a pre-paid card issued to low income families to spend on healthy food which Otago University researchers have been working on.
"When shoppers are struggling to pay the bills, they are understandably going to opt for a 2-litre bottle of soft drink at $2 rather than milk at $4.
"The same goes for choosing cheaper processed items over fruit and vegetables. We know from other research that sugary drinks are often discounted where plain milk rarely is. This is the case for many processed food items that are cheaper to produce. Finding ways to make quality nutritious products affordable would simply level the playing field."
Last night Ms Katene said food prices had increased 20 percent over the last three years while wages had barely moved.
"There are huge mark-ups on some items, in some cases 500 percent, and those prices really hit low-income families hard," she said.
The bill defined healthy food as fruit and vegetables, breads and cereals, milk and milk products (with some exceptions like ice cream), lean meat, poultry, seafood, eggs, nuts, seeds and legumes.
Labour said it would back the bill on its first reading so it could go to a select committee and the public could have a say on it.
But the Government did not agree and National MPs said exemptions would damage the integrity of an efficient GST system which was envied by many countries.
They also said there was no guarantee that prices would fall if GST was removed and definitions would become a nightmare.
"The markets get the prices that are charged now and they would continue to get those prices," said National's David Bennett.
Labour leader Phil Goff said healthy food was going to be even more expensive when GST went up to 15 percent in October and National was scared to have a public debate.
National, ACT and United Future voted against the bill. Labour, the Greens, the Maori Party and the Progressive Party supported it.