WHAT TO DO ABOUT THE COST OF LIVING
THE surge in costs of everything from fuel to Playstation computer chips to cars and houses and even homegrown fruit, has some of us worried about the prospect of “hyperinflation” – where runaway prices destroy the value of a nation’s banknotes and coins.
While gradual price increases reflect a healthy, growing economy, the rapid uplift as the world reopens from pandemic-induced lockdowns has prompted political worry, a dilemma for central banks, and repricing of financial markets. Annual changes in the cost of living are climbing the most in a decade, with a measure of global inflation compiled by the International Monetary Fund forecasting 2021 price rises to be the steepest in a decade. With fewer people hitting the malls to buy goods in 2020, prices slumped or flatlined, so recent increases versus a year ago seem greater and everyone is talking about the cost of living.
Still, we are a long way from the highs seen last century when we saw inflation peak at just under 15 per cent in 1980, while the IMF’S global gauge topped out near 40 per cent in 1993 amid fallout from the collapse of the Soviet bloc.
Many Baby Boomers still recall mortgage rates hovering around 20 per cent in the late 80s. Fortunately, we are still at a record low cash rate of 0.1 per cent until 2024 – unless global inflation turns out to be more persistent than expected.
The current price rises we are experiencing on the Coast and across Australia are primarily associated with supply chain bottlenecks.
Trying to find a handyman or tradesperson to do work on the home requires patience (and a hefty cost). For those ordering online, we have become used to a minimum 3-4 month lead time for furniture and homewares, and 6-12 months for many new vehicles.
Under present systems the poor are subject to the greatest need and distress while the fortunate live in luxury. This inequality is one of the deep and vital problems of human society. There is a pressing need for equalisation to allow everyone access to the comforts of life. The remedy must be legislative readjustment of conditions. The rich, too, must be merciful, contributing from willing hearts without being compelled to do so.
The current economic paradigm depicts growth measured with GDP as the only way to improve society, viewing economic growth as the solution to our problems.
As the rich man enjoys his life surrounded by luxuries, so the poor man must, likewise, have a home and be provided with sustenance and comforts commensurate with his needs. This readjustment of the social economy is of the greatest importance as it ensures the stability of humanity.
Avoiding overshoot and collapse means abandoning the growth paradigm for a model based on balance, efficiency, equitable distribution, and optimal sizes – in what is sometimes called the circular economy. Everything is recycled and nothing is simply thrown away. This implies a revolutionary change in economics, politics and society.
As we await such change, let’s hope inflationary pressures will be largely transitory so we can return to more normalised pricing and fair value. 2022 is shaping up to be another year of adaptation as we prepare for more unknown disruptions, but hopefully avoid hyperinflation.