HI All
Firstly prices are falling in Eastern Sydney ( my area) . My personal experience in in this post.
http://www.somersoft.com/forums/showthread.php?s=&threadid=13984
Reply to Acey asked of Jim
I'm also interested Jim in why you feel interest rates will go up a few more percent. This is not the message from any economic commentators, particulalry neither the RBA (who may move another 0.5%) or the Treasury (who see a potential fall in inflation to 1.75% and see a need to reduce interest rates over the next 18 months).
Acey, you often ask others to support why rates are going to go up?
So what do you make of these comments by Ross Gittins (Age) on why we have acceptable inflation rate. I sure you would agree inflation is critical to the level of rates? If he is right and it appears so we have a trigger here.
To save read time I will delete bits of the article (noted by....)found in full at.
http://www.theage.com.au/articles/2004/02/03/1075776057453.html
Prices rise but cost of living stays the same
Yes, things are getting dearer. But, more surprisingly, others are becoming cheaper, writes Ross Gittins.
I don't know whether you've noticed, but strange things have been happening to the prices we pay. A lot of them have been rising rapidly, whereas another lot have actually been falling.
The consumer price index ...last week showed ...., overall, retail prices rose by 2.4 per cent over the year to December. ........very much in line with the modest rate of inflation we've enjoyed for the past decade or so.................
The price of breakfast cereals has risen 4.6 per cent, ..vegetable prices 5.2 per ..fruit prices ..up 7 per cent... beef ..up 5.8 per cent, chicken 7.4 ..lamb 15.6 per cent. Eggs ..13 per cent ...cigarette prices ....up 4.6 per cent ..beer ..6.9 per cent...hospital and medical services ..up 9.1 per cent, dental ..up ...5.7 per cent.
Then there's the cost of kids. Primary school costs ..up 6.5 per cent ..secondary school ..6.9 per cent, ...10.5 per cent annual increase in child-care costs.....urban transport fares by 4.3 per cent, water rates 4.5 per cent, electricity charges 5.1 per cent, council rates 6.1 per cent, postage charges 7 per cent and gas charges 7.2 per cent.
If the prices of all those things rose by so much, how on earth can the CPI have risen only 2.4 per cent overall? Because of the amazing list of prices that fell.
... children's clothing down 0.4 per cent, women's 0.7 per cent and men's 1.8 per cent. ..towels and linen ..2.4 per cent and footwear 3.2 per cent....fridges, stoves, washing machines and the like - are down 0.6 per cent, but prices of small kitchen appliances are down 4.6 per cent.
And get this: the prices of stereos, televisions, video equipment, cameras and home computers are down 21.3 per cent.
The large sums we spend on motor vehicles make this one more significant than it first seems: car prices are down 2.6 per cent over the year.....
If you divide all the items in the CPI basket into those that are "tradeable" (imported goods plus locally made goods that compete with imports) and those that aren't, you find something interesting: the overall price of tradeable items was unchanged during 2003, whereas the prices of non-tradeable items rose 4.4 per cent.
In other words, all the moderation in inflation of recent times has been imported. You can see that clearly in the cost of holiday travel and accommodation. The cost of local holidays is up 3.2 per cent, whereas the cost of overseas holidays is down 2.3 per cent.
Has the penny dropped? The rising value of our dollar has cut the prices of imported goods and services. That's what the media always assure us will happen when the dollar goes up - and for once the textbooks were right........
If you express the prices of all the things we import in some kind of world currency (to remove the effect of the ups and downs in our dollar), they have been flat or falling for several years.
As I say, strange things are happening to the prices we pay. And there's an extent to which the overall rise in our cost of living is being held down temporarily by the rise in our dollar.
So Acey when you ask why would interest rates go up? It seems pretty obvious to me that when and it will, our dollar does down all the imported good saving our inflation rate in to 2.4%will go the other way.
Inflation then will rise, people want more wage increases and to stop sprial in costs and wages, RBA will have to tighten rates.
Im not an economist but the more I read general economy the more I think things aren't all rosy and some big shocks may be around the corner.
regards Peter 147
Prices rise but cost of living stays the same