COST OF EATING KEEPS RISING

Jessica Irvine September 24, 2010
REMEMBER when a loaf of bread was just 40¢, rather than $4 today? Ever feel that grocery prices never stop rising? Well, you're right.

An Age analysis has traced price movements across the 90 individual price indices the Bureau of Statistics uses to arrive at its overall consumer price index.

Food prices have almost doubled over the past two decades while prices for computers, cars and clothing have fallen.

Overall, it is the price of things we buy regularly, such as food and electricity, that have risen the most.

On average, consumer prices have risen 68 per cent since 1990. But there is considerable variation.

Food prices have risen 87 per cent. And within that, bread is up 142 per cent; a loaf of bread that costs $3.99 today cost $1.64 in 1990. In the mid-1970s it was just 43¢.

Prices for other necessities have climbed even faster. The cost of electricity is up 124 per cent over two decades, dentist visits up 157 per cent, education up 194 per cent, hospital and medical services up 208 per cent and insurance services up 218 per cent.

Public finance lecturer at the University of Canberra, Ian McAuley, said the cost of such items had risen faster because they were produced domestically and labour intensive. Imported goods from low-cost producers such as China had tended to fall.

The cost of audio, visual and computing equipment is down 85 per cent and cars are 4 per cent cheaper. ''We have been let off the hook by our high exchange rate,'' he said.

But as manufacturers continue to upgrade the quality of their standard models - airconditioning in cars, for example - the price you actually pay for a standard car today has not fallen as dramatically as implied by the bureau's figures, which seek to compare the cost of the same quality item over time.

Psychologists say people are irritated by inflation, even if wages rise faster to compensate.

''People are basically irrational,'' Deakin University psychology professor Bob Cummins said. ''It's just very fundamental that they want to know how much money they're going to pay in the future. With interest rates going up, many people are seriously budgeting and they see these little increases in prices as little daggers that are trying to give them a hard time.''

At the average historical annual inflation rate of 2.5 per cent, we should expect prices to double about every 28 years.

This story was found at: http://www.theage.com.au/national/cost-of-eating-keeps-rising-20100923-15otc.html