Australian shoppers — and politicians — may be about to get a very unpleasant cost-of-living shock.
Coles supermarkets just reported its official results and buried below its impressive $930 million profit is some bad news: grocery prices are rising again — faster than official inflation and faster than wages.
Prices at Coles rose 2.4% in the 2019-20 financial year, much faster than the 0.8% rise the year before, and well ahead of the wage price index which hit a record low of 1.8% in the most recent year.
“Inflation in the fourth quarter was driven by cost inflation, lower product availability, and mix impacts,” Coles reported in its financial report. (Mix impacts refers to customers buying more expensive versions of products.)
“Cost inflation was largely a result of increases in tobacco due to excise, dairy following milk cost price increases earlier in the year, and vegetables, with some lines impacted by weather conditions such as drought, bushfires and storms.”
Some of these factors look like one-off events, but food inflation is a rising phenomenon.
Rising grocery prices have almost been forgotten by Australians. They are something we have not had to deal with for a long time. The Aldi effect has kept prices flat for most of the past decade. The German discount retailer brought vigorous competition to the sector and forced Coles and Woolworths to react.
Remember the “Down, Down” campaign? Remember dollar milk? That was a response to the unfamiliar spectre of price competition haunting the grocery aisle. I remember several years of grocery chief executives reporting negative inflation at their annual reports. In 2017, for example, Woolworths reported grocery inflation of -2.1%.
As the next graph shows, between 2011 and 2019, grocery price inflation was below zero more often than it was above 2%. When you add up the total price change of food and non-alcoholic beverages over that eight years, it was just 7%.
But now Aldi is revamping its supermarkets to look more upmarket. It is emphasising quality and is not quite so eager to fight on price alone. Meanwhile Kaufland pulled out of its planned Australian expansion. The competitive environment in Australian grocery retailing is suddenly substantially more benign. Instead of down, down, there is a new jingle in the air: up, up!
The PM and the price of eggs
The cost of living is reliably a top issue for Australian voters. This is true even when it is falling.
For years, inflation has been confined to house prices, rents, electricity bills, insurance premiums, and an occasional spike in the price of petrol — each of which has been enough to cause a political brouhaha.
But inflation is nibbling away at our purchasing power at the checkout. Food is a whole other thing entirely. Not only do we spend about 16% of our weekly budgets on food, but we notice that expenditure very much and we can’t avoid it.
Groceries are a bit like electricity bills in that respect. The price is very clear and the alternatives are hard to find. We all have to eat. Price rises seem unfair and that makes voters cross. (This is asymmetrical, politicians don’t get credit when prices are flat.)
The cost of food has been a political issue since basically forever. Bread is a vital part of that staple recipe for stability: panem et circenses. In poor countries rising food prices cause riots and even civil wars. In rich countries rising prices simply cause politicians to endlessly mouth slogans about the cost of living, for fear of seeming out of touch.
The prospect of inflation at the checkout is always unwelcome. But in our current economic environment it could be political dynamite. In 2021, when the dust of the pandemic begins to settle, we will find ourselves with 10% unemployment and rising prices for food are likely to be centre stage.
Expect to see Scott Morrison and Anthony Albanese doing photo opportunities outside supermarkets as they clamber all over each other to prove how well they understand the impact of cost of living on the average Australian family.
Have you noticed a price hike or changes in your grocery buying? Let us know your thoughts by writing to letters@crikey.com.au. Please include your full name to be considered for publication in Crikey’s Your Say section
Earlier today on Crikey “As The New Daily reports, Department of Social Services officials have told a Senate inquiry that aged pensioners will not see payment boost come September, with the next possible chance for an indexation bump not due until March.
The pension’s link to the consumer price index means that, as economist Stephen Koukoulas notes, indexing in September would actually mean a lower rate.”
Pensioners got 2 stimulus payments this year! That should keep us going for at least another year. Ha ha. Lucky me at 73 with 1 other to feed. Been absolutely horrified at fresh fruit/vege prices. How can one get enough good food for a family of 4 or 5 every day? Even frozen foods are up, and junk foods always on special. On another topic, look at all the foods at supermarkets – it’s not all sold (including tinned) – can’t sell it all before use-by date so where does it go? Landfill?
“On another topic, look at all the foods at supermarkets – it’s not all sold (including tinned) – can’t sell it all before use-by date so where does it go? Landfill?”
It goes to the foodbanks to make Coles and Woolies feel good about helping the needy who can’t afford their food
Do foodbanks accept out-of-date food?
Coles’ Comment re the price rise of dairy due to milk price rises is curious as they have ignored the price of milk in their pricing for at least the last couple of years- one seems to have nothing to do with the other.
Australia is a post-scarcity society .It’s the full stacked fridge of “nothing to eat Mum”…..Food is dirt cheap..because the cost of the ‘dirt’ is not fully priced in .Roof over your head prices are obscene and a horribly obscene waste of wealth/energy/resources/labor/intelligence/ambition, etc ….And yes ,supermarket prices are going up, even not factoring in their price gouging of the current times…
A bit more Alice in Wonderland stuff:
“Coles supermarkets just reported its official results and buried below its impressive $930 million profit is some bad news: grocery prices are rising again — faster than official inflation and faster than wages. ”
I thought that the basket of goods of the Australian Bureau of Obfuscation’s numbers included supermarket prices. If they did wouldn’t the inflation figures reflect this. I know the ABO can only produce figures every three months as most of them are accountants who only have the ability to look over their shoulders at the past, but eventually the figures will be correct if three months too late.
Perhaps they don’t. Going to their website and trying to unravel their analysis and what actually constitutes their “basket of goods” requires an advanced degree in long distance spitting.
So won’t inflation reflect this newfound reality? Well of course inflation in the world of wage slaves, retirees, the unemployed and the disabled will go up. Their compensations unlike the “compensations” of CEO will not go up. But then these corporate pricks take the “heat of the battle” so to speak course inflation will be built in to their contracts. No doubt the Unfair Wage Commission will discount these price increases when they contemplate the minimum wage, but then they are just like Alice In Wonderland:
“The Mad Hatter: “Would you like some wine?”
Alice: “Yes…”
The Mad Hatter: “We haven’t any and you’re too young.”
What the Mad Hatter is referring to when he says Alice is to young for wine, is like the people who own Australia saying you can’t have a pay rise that’s reasonable, because you aren’t one of us. You are one of the poor people who is poor because of the bad choices you made when tyou picked your parents. If you had been clever like me and picked parents who were Somebody and who had money then you would deserve a pay rise, but sadly, for you you are not.
I’m glad to see someone mentioned electricity prices. I can remember at the start of this century paying 11.5 c/kWHr for my electricity now I’m paying 37 c/kWHr. This from an industry that Kennett promised us would be “more competitive” with privatization.
What ever happened to him. Is he dead yet? Or are second rate advertising executives like old soldiers; they never die. I keep hoping he’s dead and that his death was extremely depressing and painful for him, but then he pops up like a Jack-In-The-Box defending the indefensible and proving that it’s not what you know, but who you know that gets you publicity.
Yes I can confirm that prices are on the up,I only buy for 2 of us and I am unable to do the weekly shop under $100.00 plus incidentals. I am on a part pension as I saved while working and my wife will shortly be on one as she has saved during the working life. Expenses are on the up and our income is on the down!!