Sometimes you wonder if some journalists read very much, especially the speeches and reports issued by the Reserve Bank.
Last Friday, Reserve Bank governor Glenn Stevens revealed that the bank had lifted its short-term inflation forecast from 2.5% in the first Monetary Policy Statement of the year to 3% (for the June quarter).
Stevens told the House of Reps Standing Committee on Economics in Canberra that the floods and cyclone Yasi would push up prices of some foodstuffs.
“The result of this is likely to be a temporary rise in the CPI inflation rate, to around 3% in the June quarter,” Stevens said.
“This is higher than the figure in the Statement because the impact of cyclone Yasi could not be included in that forecast. The combined contributions to this outcome of all the summer flooding and the cyclone add up to about half a percentage point or a little more. These effects should begin to reverse in the second half of the year and should have largely dissipated by the end of 2011,” he said.
This morning in Sydney the RBA’s head of economics, Dr Phil Lowe said in a speech:
“The bank now expects CPI inflation to be around 3 per cent over the year to June 2011, with the combined effect of floods and the cyclone likely to contribute around ½ percentage point to this outcome. This forecast represents an upward revision to the one published in the SMP, largely because of the expected increase in banana prices.
“Of course, with the price of bananas expected to fall back to more normal levels later in the year as production recovers, there is a period during 2012 when the year-ended inflation outcomes can be expected to be lower than at the time of the SMP. Looking through these weather-related effects, inflation is expected to gradually increase over the next couple of years to around 3 per cent in late 2012.”
So no real dramas, all the news is in the market, it’s not new news.
And yet on The Sydney Morning Herald’s website, a report on Dr Lowe’s speech appeared, which reported:
“Crop damage from the Queensland floods and cyclone Yasi have forced the Reserve Bank to revise its expectations for inflation — upward — from 2.5 to 3 per cent.
“A jump in the price of bananas is likely to play a big part in that increase, Reserve Bank assistant governor Philip Lowe told a gathering in Sydney this morning.
“And it comes at the same time as food prices around the world continue to rise.”
Well, yes, we already know that, thanks to Stevens remarks last Friday.
Not a mention in the media report of Dr Lowe’s statement that inflation (and banana prices will fall later in the year).
Dr Lowe’s medium-term inflation forecast (3% in late 2012) represented no change to the previous forecasts from the bank and comments from Stevens.
So the lift in the inflation forecast is old news and it’s temporary and will reverse once the production of bananas and other foodstuffs return to normal. But don’t tell some people.
And by the way not many prominent reports today on the latest crop forecast from ABARES, which shows the damage from the floods in Victoria, NSW and Queensland, is less than reported by some media outlets in December and last month.
In fact, ABARES forecast that our cotton harvest looks like being an all-time high, despite the damage to Queensland’s crop and the rice harvest will be one of the largest ever. And the wheat harvest will be about 26.3 million tonnes, one of the largest ever and up 20% from 2010.
ABARES said the winter grain harvest would be about 1.1 million tonnes under the December forecast, because of the floods.
ABARES didn’t provide estimates for the damage to the sugar and banana crops from the flooding and Yasi.
We were told years ago that not doing anything about global warming would be more expensive than a carbon tax. I would have preferred to have my electricity bill to have gone up by 100% for the past 10 years than have had the extreme weather events that we have had the past 10 years. I wonder if Andrew Bolt and Tony Abbott prefer floods, cyclones, storm surges and droughts to higher taxes – probably do – their incomes are not dependant on the weather. Bad luck about their kids.