Inflation is bananas
Bouris warns we all have to be wary of the spurious data that emerges about rates of inflation.
Every so often we see news reported in the media that sends a wrong impression.
An example was the Consumer Price Index for March, released on Wednesday.
The CPI - Australia's measure of inflation - showed
1.6 percent for the March quarter, and 3.3 percent inflation for the year to March.
A normal quarterly inflation figure is around 0.6 or 0.7 percent. And the Reserve Bank is supposed to use official interest rates to stop inflation rising above 3 percent.
Many news outlets feared that the RBA would have to put up interest rates.
But have a closer look at the March CPI. The CPI uses a basket of eleven goods and services and tracks them by quarter and by year, to see how the prices change.
Using averages, the index is formed. And as we know, averages can be thrown out
Take food, which has risen by 4.3 percent over the year to March. Even though the prices of staples such as bread and milk are lower than they've been for years, the Queensland floods and cyclone Yasi wiped out many crops, forcing up the price of fruit and veggies. But the one that really jumped was bananas - in some places they are $14 a kilo.
It's a an aberration that will be corrected by the Reserve Bank when they look at 'weighted' mean and 'trimmed' mean.
It is from these medium-term trends that the Reserve Bank will decide about interest rates - not from a known shortage of fruit and vegetables, and one kind in particular.
Other elements of the CPI were predictable: the 5.9 percent increase during the quarter in education looks steep, but it's the quarter when schools start and raise their prices for the year.
Another stand-out is alcohol and tobacco, at 11.2 percent rise over the year to March. But most of the price of alcohol and tobacco is excise and taxes, which doesn't suggest problems in the Australian economy.
It's a similar story for the rising costs of transportation which runs on oil products, and oil prices have
The RBA knows this and I'd be very surprised if interest rates go up this week.
Still, it is concerning that the big movers in the March CPI were the inelastic items: food, transportation and housing (which shot up 4.8 percent over the quarter). There is certainly pain in the community and it seems unfair that raising interest rates is how we deal with high prices.
However, we have some smart people working at the Reserve. We're not a banana republic, as one politician once called us, but for now we have banana inflation.
- Register Now
- Community condemns ERT closure
- Abusive crackdown on migrants
- Modern Greek tragedy
- ERT's demise impacts SBS
- Xenophon warns of data sweep danger
- ERT suspension 'sinful', says Megrelis
- Court orders Greek broadcaster ERT back on air
- Outstanding Greek Australians honoured
- The thief strikes back
- Samaras dismisses talk of early election over ERT
- 10 Jun 2013 | 16 Votes
- 22 May 2013 | 16 Votes
- 28 May 2013 | 14 Votes
- 30 May 2013 | 12 Votes
- 11 Jun 2013 | 7 Votes
- 27 May 2013 | 7 Votes
More from this Section
- Better energy policies for Australia, says Liveris
- My inheritance in Greece and how to claim it
- What is an estate plan? Part one
- Dozens of lenders cutting fixed rates
- House prices
- Aussies are paying off their credit cards
- Financial health check
- Bank of Sydney appoints new CEO
- On his way to 'a safe haven'
- Million dollar challenge
Sources say Postecoglou wants Karagounis to be Victory's Del Piero
MPs react to predictions of electoral Armageddon for Labor on September 14
A political row over how to tackle a rise in racist attacks intensified this week after the two junior partners in the coalition, PASOK and Democratic Left (DIMAR)
What water privatisation really means
Visiting troika inspectors have expressed frustration over the delayed overhaul of Greece’s dysfunctional tax system
If they can find steady work, Greeks are overworked and underpaid
After a phenomenal 4-0 win, the Socceroos will still need another win to qualify
The Championship playoff is estimated to be worth STG120 million ($189.33 million) for the winning team making it the wealthiest football match in the world
The Round Eight of VPL brings the exciting encounter of the top two on the ladder, when unbeatable Northcote City hosts a confident Bentleigh Greens
The Napthine government's budget cuts to employment services for young Victorians have been condemned at a rally held on the steps of Parliament this week
Some of the numbers associated with retirement seem really big, Mark Bouris helps you sort it all out
Police in Thessaloniki have arrested two men and three women, all Bulgarian nationals, following a sting operation in which the suspects attempted to sell a newborn baby.
The 'Unresolved' Cyprus Conflict was the subject of Dr Michalis Michael, Research Fellow at Centre for Dialogue of La Trobe University, keynote address during the conference
Former ERT World director Nikos Megrelis believes ERT was a victim of union intransigence and government mismanagement
The University of NSW celebrates the life of one of the world's greatest poets, Constantine P Cavafy
Over two nights, the youngsters in Belmore United and Earlwood Wanderers sparred with Sydney FC players
Tuesday's qualifier will be another litmus test to see if the Australian team is good enough for the World Cup
The world's most preeminent coffee competition, World's Best Barista and Best Brewer, finished last week, with Greek mission taking home the 11 and 14 ranking