Wednesday, April 16, 2008

The creeping catastrophe

I am chronicling a creeping catastrophe - one that has been approaching since the 1960s, if not earlier, but one that people have largely been able to ignore until now. And even at this late stage, they are sitting up and taking notice only because of the inexorable rise in food and fuel prices. My pessimistic guess is that they haven't seen anything yet.

Today's Dominion Post carries a story headlined "Food eats into income" on Page 1. The article, by Rebecca Palmer, begins: "The cost of a supermarket trolley of basics has surged, new figures confirm." It continues: "Nine items that families commonly buy rose on average from $30.82 to $38.58 in the past year, food price index figures issued by Statistics New Zealand yesterday show. The rise represents a 25 percent increase.

"The biggest price leap in the trolley was for cheese - $10.69 for a one-kilogram block of mild cheddar this March, up from $6.46 last year..."

In a sidebar, the paper points out that "we live in a country full of cows, but dairy products are dearer than ever. Cheese prices rose by 44.2 percent in the year to March, butter by 82.2 percent, and fresh milk by 21.7 percent".

In the same (morning) issue of the paper, on the first business page, the No 2 headline reads "Inflation heading to 4 percent". Only 4 percent? I ask myself, as I read in the second paragraph of the story by James Weir: "Annual inflation was 3.4 percent in the March year, according to [the] latest figures, but is expected to rise further this year" despite a slowing economy.

In this evening's Manawatu Standard, a "backgrounder" by Michael Daly points out that all this poses a problem for Reserve Bank governor Alan Bollard, who is charged with keeping inflation between 1 and 3 percent.

Towards the end of this article we find: "Coming soon will be the Government's emissions trading scheme, which Dr Bollard has warned will cause a significant boost to inflation in 2009 and 2010."

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