Dan Petrie: Inflation is back and you’ll find it at the butcher

Lamb chops, school fees, petrol and renovations — prices are rising at an uncomfortable rate and that means one thing: inflation is back, writes Dan Petrie.

Queensland, the cost of schooling, food and petrol is on the rise and you can blame these latest price hikes on your local butcher.

From 2000 to 2015, the price of beef had risen steadily from $10 per kilo to $15.

In the last three years however, the price of meat has skyrocketed to a staggering $23 per kilo.

The cost of a whole leg lamb roast is now $34, while 500 grams of mince costs over $10.

Yes, inflation, which laid dormant for the last decade is also reawakening and this is a time to be alert but not alarmed.

As someone who specialises in the dark arts of statistics, observing such a trend gives off an all-too familiar ominous dread.

Has the butcher’s counter become the canary in the coal mine for the national economy given the acceleration in meat pricing in the last three years?

Inflation in Australia is typically underpinned wage price and cost of living pressure.

Wages in Queensland have been suppressed for the last decade as the private sector north of the Tweed has absorbed a raft of state levies, power price increases and a crippling drought.

A larger population and available pool of skilled workers in metropolitan areas has only exacerbated the challenge of trying to naturally boost the pay packets of Queenslanders working in the private sector.

Food price inflation has, for the most part, remained steady, with a chocolate bar retailing for $2 at Coles or Woolies, a can of Coke now $3 at the corner store and fuel prices up until recently hovering at $1.30 per litre.

Simply, steady and predictable.

Then a global pandemic hits, the Reserve Bank cuts the official interest rate to 0.1 per cent, and state and federal governments craft fiscal policy aimed squarely at the one asset class that delivers time and again for the Australian economy: property.

Queensland’s economy has been a net beneficiary of such policies and enjoyed a strong 12 months of economic activity as a result with population projection being remodelled before our very own eyes.

Meat is one area where prices are rising. Picture: David Caird

The availability of builders and tradespeople is now a lead news story with would be home builders now waiting months for work to begin and quotes also rising.

But the most recent inflation print from the Australian Bureau of Statistics at 1.1 per cent suggests the costs of living are somewhat subdued.

Nothing to worry about, right? Not quite.

The same entity that has cut rates to zero, the RBA, is forecasting inflation rising to 3 per cent in the June quarter and is also highlighting the price of oil.

Yes, oil, which only 10 years ago was flying high at US$100 per barrel and then subsequently dropped to $US30 in the following years as oversupply and market sentiment suggested the black stuff’s best days were behind it.

However, the price of crude, which dropped to as low as US$16 per barrel in April last year, is edging to $US70 per barrel. Why you ask? Demand for petroleum is rising as we swap the plane trip for the road trip.

If that same demand remains elevated, then fuel as an input cost is also going to put pressure on what many us buy at the shops.

There is a lot at ‘steak’ with an economy that is starting to run hot.

In the United States, inflation has become the key theme making investors nervous. Yet, meanwhile in Australia, the issue receives little attention.

US president, Joe Biden’s Covid stimulus package of $US1.9 trillion for an economy that is in relatively good health dwarfs the Depression Era package brought about by then president Franklin D Roosevelt and if anything will only add to inflation concerns for US economy watchers.

Many of the same experts who I spoke with in 2008 who forecasted the ASX would be 8000 points by the end of that year were only off by 5000 points when the index crashed to 3000 points following the global financial crisis, are also dismissive of the inflation concern offshore.

I have no ‘beef’ with any of the aforementioned experts but a trip to the butcher may pose some food for thought.

Dan Petrie is the Chief Information Officer of data analytics firm, Grafa and a former Economic Data Editor at Bloomberg LP who also goes by the name of Data Dan – do you have a data question? Email [e-mail]

Originally published as Dan Petrie: Inflation is back and you’ll find it at the butcher