If you’ve felt like your money isn’t going as far as it was then you’re right.
UBS Bank says food prices are rising over 5.5 per cent at Woolies in June and 5.1 per cent at Coles. That’s a two per cent increase over March. and it isn’t over yet.
Shaun Cousins, who led a team of UBS analysts, says: “Commodity pressures remain, while further labour cost inflation will need to be absorbed and fuel and energy costs are likely to stay elevated.”
He added supermarkets were not discounting groceries, due to supply chain issues caused by the COVID-19 pandemic, flooding and the Russia/Ukraine conflict which has pushed fuel costs up.
Meanwhile fast food is also going up.
Hungry Jacks has increased its menu prices with CEO Chris Green telling The Australian Financial Review that there wasn’t much of the business that hasn’t been impacted by inflation.
That said, you can still get a double cheeseburger and chips with a coke for $5.
“There is no doubt that menu prices have definitely increased at a faster rate over the last six months. And we’ll need to lift again over the next six to 12 months.”
CEO of Collins Foods, Drew O’Malley, which operates 261 KFC outlets in Australia and 62 in Europe, said they were likely to increase prices for the third time this year.
KFC hit the headlines recently when they announced that they would be substituting iceberg lettuce with diced cabbage in some of their burgers.
Their website says: Due to recent weather, we’re currently experiencing a lettuce shortage (except NT & SA). So, we’re using a lettuce and cabbage blend for all products containing lettuce until further notice. If that’s not your bag, simply click ‘Customise’ on your chosen product and remove lettuce from the Recipe.
Their “Christmas in July” dipping box costs $12.45 – but includes gravy, stuffing mayor and popcorn.
It was recently reported that iceberg lettuce reached $12 a couple of months ago but the price at Coles yesterday was $6.20 and $6.90 on the Woolworths site. Lettuce is listed for $10 at IGA. Foodworks in Redfern is selling iceberg lettuce for $6.99. They are also selling lettuce pots for $5.99. The type of lettuce is not specified.
People should be worried about inflation because it is coming at a time when the central banks are also increasing interest rates. Over the last three months, the RBA increased the official cash rate from 0.10 per cent to 1.35 per cent.
Analysts are expecting the RBA to raise rates by 0.75 per cent, which would be the largest increase this year.
The impact of the previous interest rates is over $500 a month and could jump even further if predictions are correct.
Those increases will affect property investors and renters as well.
Nectar Mortgages, Licensed Mortgage Broker, Geoff Grist said: “Rents were down a bit last year and they’re on the rise as well. We went through a stage where interest rates were at their lowest and they realised that for the same money they were paying in rent they could buy their own property.”
Higher interest rates are going to put pressure on the budget but, as Mr Grist pointed out: “Interest rates have been so low and it has been unsustainable so they couldn’t stay there so they had to go up at some time.
“The reason the Reserve Bank gives for increasing rates is to try and stem inflation because if we don’t raise rates then inflation will get worse and then we’ll never be able to reign it in.”
Although some companies are offering sign-on bonuses to attract candidates, Mr Grist said that he had clients who hadn’t seen their wages keep up with inflation.
That means that in real terms they have actually had a pay cut.
The Reserve Bank has predicted that inflation will reach 7 per cent before the end of the year. That compares with wage growth of just 2.4 per cent.