A flood of price rises
Treasurer says produce will go up another 8%
THE price of fruit and vegetables is expected to leap by 8 per cent in the next six months in the wake of major flooding.
The production of fruits, grains such as wheat and barley and dairy and livestock is expected to be affected by the disaster unfolding across prime agricultural land in eastern Australia.
Jim Chalmers said early government estimates indicated the October floods would bump up inflation by 0.1 percentage points in the December quarter and again in the March quarter of next year.
“It is too early for us to put a very precise price tag on the flooding that we’re seeing through such large swathes of Australia,” the Treasurer said on Friday.
“But we do know that there will be consequences for the economy and for the budget.”
Mr Chalmers made the announcement four days before he hands down his first federal budget, which he says will focus on “responsible” cost-ofliving relief.
He said the floods had come at the worst possible time for farmers and for Australians who were already under the pump.
“What’s happening here to these areas is particularly cruel, I think, given how close many of these farms were to producing what was expected to be a bumper crop,” he said.
The Albanese Government has put aside an additional $3bn for natural disaster recovery that will go towards flood relief measures such as emergency disaster payments.
“We don’t know yet whether that $3bn will be sufficient,” Mr Chalmers said.
“But we consider it prudent (and) responsible to put some of that money into the contingency reserve on the expectation that the government bill for what we’re seeing in these flood-affected areas will be substantial.”
Treasury has also forecast the floods to detract about 0.25 of a percentage point from GDP growth in the December quarter.
This is expected to be offset by increased economic activity across the first half of next year.
Treasury expects that food prices alone will contribute 1.5 per cent to the inflation peak in the December quarter.
Despite these rising costs, Australia’s official inflation rate is still forecast to peak at 7.75 per cent, as lower than anticipated petrol prices effectively cancel out the higher grocery bills.
The Australian Bureau of Statistics made a similar statement late last month when it released its most recent consumer price index.
The ABS said more expensive fruit and vegetables helped maintain Australia’s inflation rate at about 7 per cent, while modest fuel price increases tempered the pace of growth.
Consumer prices rose 7 per cent in the year to July before easing slightly in August, down to 6.8 per cent.
The CPI measures the average change in prices paid by Australians for goods in the 12 months to its release. This figure is used as a measure of the country’s overall inflation rate.