Sunday, January 2, 2011

Cost of Living Increases Expected for 2011

This article was published in the AGE newspaper this morning:

Hikes to hurt households

Jessica Wright
January 2, 2011
    FAMILIES face cost-of-living increases that could drain the weekly budget by up to $100 this year.
    New data shows Australians are being hit with record expenses for basic services while the floods that have wiped out crops in Queensland and NSW are predicted to raise fruit and vegetable prices by up to 50 per cent.
    Any hope that the strong Australian dollar would shield motorists from increases in fuel prices have been dashed - global oil prices are tipped to hit record highs early this year.
    This year's price increases will compound the cost pressures already inflicted on households.
    The price rises for local commodities such as wheat, sugar and coal as a result of the flooding come on the back of a 26 per cent increase in global prices for grain and rice from June to November last year.
    AMP chief economist Shane Oliver said: ''There is no doubt there will be upward pressure on food - bread, fruit and vegetables. It is a bit like a few years ago when we saw a cyclone and what happened to bananas. Some things will reach up to 50 per cent extra, others not as high, but there will be definite rises. There are entire crops under water and this is going to have a big effect.''
    In the three years to September 2010, the price of electricity for the typical Melbourne home rose 54 per cent. The price of water rose 62 per cent, the price of gas rose 28 per cent - the highest price increases during the period of any capital city, according to the Australian Bureau of Statistics.
    The bureau's projections for utility prices this year paint an equally severe scenario of escalating costs.
    The trio utility costs alone represent an extra yearly burden of about $1000 on family finances - or $20 a week - for an average household of four, while grocery bills are set to rise on average by $50 a week, based on an average weekly bill of $150.
    The figures sit in contrast with inflation, which rose during the same period by just 8 per cent.
    Annette Beacher, the head of Asia-Pacific Research at TD Securities, said inflationary pressures were increasing and could translate into another interest rate rise in the first quarter of this year.
    ''We're starting to see … [a] shift into more price rises than price falls,'' Ms Beacher said.
    Housing affordability has taken another dive, with industry figures showing the largest yearly decrease in affordability in a decade.
    A report by the Real Estate Institute of Australia showed the proportion of income required to meet loan repayments increased 5.8 per cent to 34.8 per cent during 2010, a 10-year high.
    The Bureau of Statistics also identified health costs, communications services and petrol prices as having risen sharply over the year.
    FUELtrac managing director Chris Kable said that along with oil price rises, motorists were carrying the extra costs of supermarket loyalty schemes, which he believed were artificially inflating prices.
    However, the dollar is set to continue its record-breaking run against the greenback and the euro.
    How will these price rises affect you?

    Now is defintely the time to sort out your budget, sort out your priorities and prepare for a much higher cost of living.


    1. I really enjoy your blog.

      I live in the US but we are facing the same problems that you mentioned above.

      My husband and I have always been relatively thrifty compared to most Americans but we have been cutting out and cutting back even more for the last 5 years or so. That is going to continue on in 2011.

      Clipping coupons, stock piling, cutting out all the 'stuff' that the American culture teaches you to 'need', learning to garden and barter for food are the norm for us now.

      We have a ways to go, a lot to learn and probably will never reach an unforced self sustainable life but we are doing pretty well.

    2. It's definitely time for budgetary action. So much financial pain to come I think.