In November 2007 someone came to the nation and spoke directly to the heart string that’s connected to the hip pocket of the average Australian - “working families that I talk to right across this country of ours say to me they’re under real financial pressure, from rising interest rate payments on the mortgages, from soaring rents, soaring grocery prices, petrol prices and of course the cost of child care as well.”

Like a lover on one knee delivering a proposal, the words continued to be aimed at the hearts of many - “Working families today are facing a double whammy. From increased interest rates and downward pressure on wages through AWAs”

So, after we, as a nation, said yes what did we expect? It would be reasonable to say that there could be an expectation amongst the people that interest rates, rent, grocery prices, petrol prices and child care are going to be going down and that downward pressure on wages would cease.

So, how’s it all going, saving a penny or two? Ok, let’s get real and while we are in the real world perhaps there are realities we have to face and things we have to accept. Starting with those fuel bowser blues…

In the face of rising petrol costs we can run around yelling ‘big oil’, scream about accusations of ‘profit gouging’ and initiate inquiries and set up petrol commissioners that show these evil companies what’s what. But, we have already been warned that savings of 15 cents per litre were completely unrealistic from our new commissioner.

So maybe we need to consider that this petrol stuff is made from a natural resource called crude oil that since 2003 has risen from $40-60 a barrel to $80-$100 a barrel with one of the major explorer/producers forecasting easily accessible oil supplies are close to not meeting demand.

Perhaps the faster we accept the facts behind increasing cost of fuel the faster we can make better decisions on correctly allocating resources and planning for the future, alas, moving towards a result of real benefit.

Similarly we could also look at food prices in a similar manner. Inquiry? Sure, why not. Might just find a transport industry along with farmers that have been absorbing costs for too long, perhaps unsustainably.

Just as crude oil is required to make fuel, water is required to grow food. It’s all fingers crossed that we are moving out of one the nations worst droughts but where are we with the management of water resources? Perhaps a better question is can we ‘engineer’ a solution to drought proof our farming land and increase productivity in a world with a commonly shared concern about food price inflation.

That leads us to the larger question of inflation and it’s one that we should not share alone. Annual inflation in the OECD area at 3.3% in December 2007 with the US inflation riding at a 17 year high and suggestions that Chinas latest export is inflation and the latest Retail Price Index from the UK rising to 4.1%.

Locally the Reserve Bank writes that, for Australia, inflation is forecast to decline gradually from late this year, but would still be around 3 per cent in two years time. That’s if rates remain unchanged, if rates continue to be raised, once or twice more, one could assume that the economy would slow faster and inflation may fall back into the comfort band of 2-3% but that perhaps assumes downward pressure on rising wages.

And that brings us back to the work place, AWA’s and downward pressure on wages. Which, apparently, is bad, but inflation is bad too, apparently. But wage restraint is cool? Wanna swap 50 cents for half a dollar?

It’s going to be a tough sell, particularly to unions. If we look back to the 1980’s when the Accord was negotiated between the then Labor government and the unions, tax cuts were given in return for wage restraint along with productivity based increases. With an end to the previous Howard government policy of returning excess budget surpluses as tax cuts it’s hard to see any form of symbolic gestures satisfying union desires or those of workers. All this to consider and the start of the new policies haven’t even made it through the senate.

And, we haven’t spoken about soarings rents or child care costs yet. So, if you’re part of a working family you might have to start working a bit harder. Ok.

Other Readings:
Statement on Monetary Policy - February 2008
RBA
Extract: The Australian economy has remained robust in the recent period, notwithstanding a more difficult international environment. Domestic demand and activity have remained strong and capacity usage is high after a long period of economic expansion. These conditions have been associated with a rise in inflation. Hence Australian monetary policy has had to take into account sharply contrasting domestic and international developments…..
Visit the RBA »

Repossessions soar as homeowners start to feel pain
Courier Mail
Extract: Queensland homeowners are increasingly going under and losing their properties as the mortgage crunch claims more casualties with each rate rise.
Justice Department figures reveal property repossessions have spiked 109 per cent in the past four years as the monthly repayment on the average home loan rose from $1737 in 2004 to $2067 today….Visit the Article »

Crunch hits banks
Herald Sun
Extract: Australian bank stocks are in free-fall as fears grow that bad debt charges and funding costs will cut a swathe through their 2008 earnings….Visit the Article »

Get tough, Wayne
Herald Sun
Extract: Wayne Swan made a limp-wristed attempt this week of reining in the banks’ billion-dollar bounty by making it easier to switch banks, and investigating exit fees on mortgages. It was like flogging the fee-masters with a feather….Visit the Article »

SEQUAL-RFI Reverse Mortgage Study
Sequal
Reverse mortgage peak body, SEQUAL, is calling for government support to educate retirees on the benefits of reverse mortgages after a survey revealed 60 per cent of retirees do not understand them. Retail Finance Intelligence (RFI) interviewed 1000 Australians aged over 60 and found 78 per cent of respondents had heard of reverse mortgages but only 40 per cent understood the product. View the report [PDF] »