Everywhere is feeling the pinch

Here is an edited excerpt from a newspaper article about rising petrol prices and household expenses. It says nothing new but is interesting for reasons outlined below.

Tough times ahead
The increase in the retail price of petrol will result in a “period of anguish” for households, an economist said on Wednesday.
Absa economist Chris Hart said the increase would cause food prices to rise and lead to fuel inflation. Hart said the country was expecting a hike in electricity prices as well as an increase in the rate of taxes in the coming months.
“We will see a period of anguish. A significant number of households will lose their houses and cars because of the pressure of the high prices,” Hart said.
Household income would not keep up with the pricing pressure.
The Chemical, Pulp and Paper, Printing, Wood and Allied Workers Union (Ceppwawu) said the effect of the petrol increase on food prices was enormous.
“Although the department of minerals and energy say they do not have control of petrol prices, we are not happy with this increase and would like to discuss the repercussions with them and other government departments,” spokesperson Keith Jacobs.
Economist Mike Schussler said there was a possibility of a high interest rate hike next month.
He said the petrol increase could lead to the Reserve Bank Governor calling for an emergency monetary policy committee meeting.
A Reserve Bank spokesperson declined to comment.
“We do not comment on petrol prices,” she said.
She would not be drawn to comment on the effect it would have on interest rates.

While it’s a familiar story, what’s interesting about is it’s from the South African Star newspaper which shows that fuel price increases, high inflation, rising interest rates are not specific to Australia – the only difference with this story as opposed to one that would appear in an Australian newspaper is the ommission of the words “working families”.

What this shows is that pinning hopes on the Rudd Government’s first Budget to contain things is naive to say the least. Regardless of what we were told during the election campaign it’s global forces that influence our economy not the government fiscal policy. All the government can do is avoid the moving obstacles rather than steer us through them.

P.S. It’s worth noting that in South Africa, inflation is running at higher than 10 per cent. In Australia it is 4.1 per cent.