Don’t blame supermarkets for price rises
Everybody loves to complain when the price of bread, milk, cheese and other household staples creep up.
Like rising interest rates and the price of petrol, increasing food prices provoke anger and frustration among many struggling Australians families.
So it is not surprising that fluctuating food prices are regularly blamed on food and grocery companies and supermarkets.
Food and grocery manufacturing is Australia’s largest manufacturing industry employing 250,000 people, half of whom are regionally based. And 90 per cent of the ingredients used are sourced from Australian agriculture.
It’s a knee-jerk reaction for people to assume that these large food manufacturers are the culprits. Last week even Michael Luscombe from Woolworths blamed manufacturers for price increases.
The worn-out moniker of giant “multinationals” ripping off customers is simply untrue.
Like most industries in the current economic climate, Australia’s food and grocery manufacturing sector is under intense price pressure on a range of fronts.
Pressure on commodity prices is coming from weather extremes like drought and floods and the cost of inputs including packaging, water, transport and energy have all risen significantly over recent years.
Other key price-influencing factors are the low Australian dollar which impacts on commodities normally priced in US dollars.
In large emerging economies, such as China, incomes have grown and, as a result, average meat consumption has more than doubled. As far more grain is required to produce a kilogram of meat than a kilogram of bread or pasta, there has been international upward pressure on grain prices.
Global demand for industrial use of cereals has also increased by 25% since 2000, predominantly as a result of government subsidies for ethanol production, producing shortages of these crops for food use. And the rapid urbanisation of the world’s growing population has meant that land use for agriculture has declined, putting further pressure on food production and therefore, prices.
All of these issues come together to produce more upward pressure on food prices than we have seen for many years.
A recent newspaper article in The Daily Telegraph claimed that feeding a Sydney family today has rocketed to about 95 per cent more than 20 years ago.
Of course, this statement neglected to mention that average weekly earnings have also steadily risen over the same period at almost the same rate as the Consumer Price Index (CPI). The latest ABS figures* show that average total weekly earnings for men and women in Australia has more than doubled over the past 20 years from $434.30 in February 1989 to $916.10 in February 2009.
Even with these current price pressures, food has become progressively more affordable over recent years. Remember when chicken was only for Sunday roasts and special occasions and smoked salmon and camembert were unaffordable luxuries!
At the same time choice and competition on the supermarket shelves has increased dramatically, with ever increasing numbers of convenient and healthy foods available.
There’s nothing to be gained from the blame game on food and grocery inflation.
However there is plenty to gain from maintaining a robust food processing industry in Australia that will help ensure our safe, sustainable and nutritious food supply remains affordable into the future.
Kate Carnell is Chief Executive of the Australian Food and Grocery Council.
*ABS figures sourced from Average Weekly Earnings, Australia (dollars) – Seasonally Adjusted – Feb 2009.
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