Peeling back Australia's inflation figures

Why the country's booming economy risks slipping up on bananas.


    Not many shop owners grin, on camera, when they tell you how expensive their goods are.  But Moery Najib, who owns Emiles Fruit and Veg in the Balmain district of Sydney, knows that his prices aren’t exceptional.

    All over Australia people are paying astronomical amounts for bananas.

    The fruit cost $3 a kilo a year ago, today Moery’s selling his for more than $20. A single banana - a normal sized banana - costs $4.

    By freezing interest rates at 4.75 per cent on Tuesday, it seems Australia’s central bank has decided that the country’s inflation rate - 3.6 per cent - is high for temporary rather than structural reasons, and bananas may be a big part of that. 

    Their dramatic rise in price is because of Cyclone Yasi which hit Queensland’s banana plantations in February, wiping out nearly 90 per cent of the domestic supply.

    The cyclone was not the sole reason for the spike in banana prices.  Many economists argue that Australia's trade politices contributed - foreign imports weren't allowed in to offset the domestic shock.

    Australia makes it close to impossible for, say, Filipino growers to satisfy strict quarantine requirements.

    I had thought this was simple protectionism - to pacify a strong domestic farming lobby.  So it came as a surprise to hear an economist making the farmers’ case

    He though, is in a minority - this is a view more typical.

    The argument is that the costs to an entire nation having to forego what would, ordinarily, be a staple food, outweighs any spurious risk of fruit 'disease' from abroad. 

    This goes broader than bananas.
    As a relative newcomer to Australia, I’m constantly surprised at the high cost of food across the board here. 

    A standard chocolate bar - when I could afford them, Snickers used to be my favourite - costs the equivalent of US$3 in the supermarket, a small punnet of strawberries is US$5 most sandwich shops in Sydney charge around US$10 for a basic BLT. 

    The high Australian dollar - US$1.10 this week - has a lot to do with high costs in US dollar terms, but it can’t explain the full extent of the high prices.

    Instead, I put a lot of it down to the enormous pride there is here on eating Australian food.

    But would that pride be quite as strong if the average Australian realised how much extra they pay to "eat domestic"?



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