It might look bad, but food isn’t actually that expensive
Nothing hits a family’s weekly budget harder than increases in the costs of daily essentials like food. Price hikes at the supermarket make consumers angry and politicians nervous.
And all shoppers know that the price of many staples have increased over recent years.
This was highlighted by the latest OECD figures showing the cost of feeding an average family has risen about 40 per cent in Australia over the past decade. So who is to blame – major supermarkets, manufacturers, the government?
Let’s have a look at the facts.
While there’s no doubt food prices have risen over the past 10 years – like all other commodities – food has actually increased in price at a lower rate than wages have increased.
The latest ABS figures* show average weekly earnings for men and women in Australia have risen by more than 50 per cent over the past 10 years with figures showing total weekly earnings rising from $611.00 in May 1999 to $922.50 in May 2009.
So food is actually more affordable than it was 10 years ago for the average family.
It will be no surprise that salary costs are one of the major inputs into the cost of food. Whether it be jobs on the farm, in the factory, in transport or in the supermarket – wage increases significantly effect the price of food.
Australian food and grocery manufacturing industry – which in a new report was found to be the nation’s largest manufacturing sector ,employs about 315,000 people including half in rural and regional areas. And this does not include the large numbers of people working in agriculture and in retail.
There are also price pressures from a range of other areas, including weather extremes like drought and floods and the cost increases in packaging, water, transport and energy. Other major challenges surround the strengthening Australian dollar.
The rapid urbanisation of the world’s growing population has meant that land use per capita for agriculture has declined, putting further global pressure on food production and prices.
Global commodity prices have skyrocketed with wheat rising from US$154 a tonne in 2004/05 to more than $270 a tonne in 2008/09 according to the latest ABARE figures, which also show rice has jumped from US$278 a tonne to more than $600 a tonne over the same period.
Basic food commodities rose by 60 per cent between 2006 and 2008 with the Food and Agriculture Organization of the United Nations (FAO) saying that the pre-2006 prices will never be seen again.
Australia is also facing the pending problem of the Federal Government’s proposed Carbon Pollution Reduction Scheme (CPRS) and Renewable Energy Target (RET) that will cause the price of energy to rise between 30 to 40 per cent.
This will ultimately increase food, beverage and grocery prices of products made in Australia by up to five per cent on Australian supermarket shelves.
So wages increases, climate change, increases in energy and commodity prices and currency volatility all put pressure on food prices.
Kate Carnell is Chief Executive of the Australian Food and Grocery Council.
* ABS figures sourced from Average Weekly Earnings, Australia (dollars) – Seasonally Adjusted – May 2009.
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