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Fruit up 15.5%, vegies up 11.4%, and a new tax to come



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Joe Hockey, MP 

Shadow Treasurer 

Member for North Sydney

FRUIT UP 15.5%, VEGIES UP 11.4%, AND A NEW TAX TO COME?

25TH JANUARY 2011

The December quarter inflation figures reveal yet again the intense cost of living pressures faced by Australian families.

It might seem comforting that annual headline inflation is now running at 2.7%, around the middle of the Reserve Bank’s target zone. However, this in part reflects relatively benign imported inflation due to the high Australian dollar. Domestically sourced inflation - the price of goods and services sourced in Australia - remains well above the top of the Reserve Bank band at an annual rate of 3.4%.

The big increases in the December quarter were in essential food items such as fruit - up a staggering 15.5% in the quarter - and vegetables - up a massive 11.4%. Over the year there were big increases in water and sewerage (12.8%), electricity (12.5%), gas (7.1%) and education (5.7%).

These are goods and services which Australian families cannot do without. There were big reductions in the cost of some items over the year such as audio visual and computing equipment - down 18.3% - but spending on these items is discretionary and the lower prices are of little use for families struggling to make ends meet.

The big increases in fruit and vegetable prices would not yet reflect the impact of the recent floods. There is already evidence of higher prices for many food items in the current quarter.

In this light it is inconceivable that the government would be contemplating adding to the financial pressures on Australian families by imposing a new tax to meet the costs of repairing the damage from the floods.

The Coalition emphasises that it believes the damage to homes and infrastructure must be repaired as soon as possible and that the government must be generous in its spending. But it must do it in a way that spares struggling families from further financial pain. The only prudent way is to cut back on its wasteful and unnecessary spending in other areas. Failure to do so will risk overstimulating an already stretched economy, inevitably resulting in higher interest rates.

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