Were told to expect another interest rate rise and then another one in februrary, which makes 7 in 2 years.

Latest reasons given in todays australian newpaper, food has soared another 9.9% in the last quarter fruit has soared another 20% in the last quarter. What sort of a mess are we in to have price rises like that :scared:

So then everytime the cost of living soars we are told interest rate rises will make the consumer tighten their belts. Given most of these reasons for the rate rises are essential consumer items, interesting thinking.

Doesnt gel with me, interest rate rises get passes on, prices rise again, creating an outlook of never ending price and interest rate rises.

The countries in its 6th year of drought none of this helps that problem either.

Another aspect is this is already affecting the housing market, yet the government is so out of touch its still saying there is a trade shortage, not in the housing industry theres not ! Plenty of tradies out of work now.

Economics has never been easy to comprehend at the best of times, but then with a PM who, as Treasurer told the general public that he failed Maths AND Economics at high school, well.........

Interest rates are still comparitively lower than they were 25 years ago.

If it's all a bit too much, I guess you could always come back to the UK - where domestic energy prices have nearly doubled in a mere three years.
Beeb.

What sort of mess is the UK in to have prices like that?

[QUOTE=Vash the Stampede]If it's all a bit too much, I guess you could always come back to the UK - where domestic energy prices have nearly doubled in a mere three years.

Yes, our gas direct debit has just increased from £28 to £45 per month. We were not in arrears and we are tight! ...WTF!?

Before we came out, our Gas direct debit was £38 per month and our electricity was £97 a month!! :scared:

What on earth has the price of fuel in the UK got to do with economic policy in Australia? Will you please stop trying to turn every discussion into UK v OZ.

Back to the original point, Jim and I were talking about this last night. Prices of basic food items have risen dramatically so that people are now struggling to afford them and are left with less money in their pocket at the end of the week. So by some perverse logic, its likely that the central bank will hike up interest rates leaving people with even less in their pocket. I actually passed A level economics and it still makes no sense to me.

Jane

Well said. After nearly a year here, we are still dipping into our UK savings to survive here as it it - we just can't believe the cost of living here is so high, compared to our wages. It isn't going to get any better in the near future with all the talk of food price increases because of the drought. We have a big fat minus at the end of each month!

Have you not all seen the record profits Coles and woolies have been making....

With lower interest rates - consumers tend to borrow more to go splash out on all those luxury goods such as plasma TV's, cars, designer clothes etc. This fuels inflation (supply Vs demand etc), which in turn increases wage demands as people want to keep pace with the cost of living, leading on to higher costs for employers, passed on to consumers etc etc.

By increasing interest rates - people will borrow less, use the money they have to repay debts and dampen demand.....thereby 'eventually' reducing prices.

Mud and clear spring to mind?

Some light reading.

Fine in theory, but in this case, its the rise in the prices of basic food costs thats fuelling the inflation, not luxury goods.

I suppose its one way of fixing the obesity problem, though! People have to eat less because they can't afford to buy food.

Jane

I'm not an economist, but doesn't the increasing cost of fruit and veg have more to do with reduced supply than increased demand?

I understand the need to raise interest rates if there's excessive demand causing the price of goods to rise, but if the rise in the CPI is caused by the drought, or by external factors such as oil prices, I don't see what raising interest rates is going to do.

Hey ho ...

The restriction of supply is the key issue.

I wonder if there will ever become a point when Australia realises that the quarantine laws (which prevent free markets from really working) are a luxury which it just cannot afford?

(Or when potato farmers in WA just revolt and say that they've had enough of being controlled by a central supply board and will just sell to whoever they want?)

(Or when independent fuel retailers just undercut the big players and don't have to tell anyone about it)

(Or when everybody and anybody in WA can sell whatever they want, when they want without being regulated)

(Or when skilled people can start supplying their skills without jumping through a thousand hoops (which restricts supply))

The more I live here the more I think that supply constraints - in many areas - are the biggest single issue affecting consumers.

Yes but food and petrol, fruit and electricity.......... are hardly luxury goods are they?

Agreed ... all of which seems to be done under the dubious name of "consumer protection" ...

Best regards.

Vash,

This thread was about the economic thinking in Australia, Not the UK , no-one wants to turn this into a "my country is better than your country" so i cannot see the relevance in all the stats about the UK