Monday, March 05, 2007

Cheap, cheap & expensive

Being a long-term S.N.A.G. I have, since arriving back in Australia in 1988, happily offered my Thursday nights to do the family shopping to reduce the burden of duties on my much better-half, Mrs. Clarke. Moreover, I do this with a smile on my face - never a complaint.

Accordingly I have become an expert on prices - and on the check-out chicks - but that's another story. I know when things are cheap and when they are pricey. Not by studying the CPI data from ABS , mind you, but by pulling hard-earned $ bills from my back pocket at cash registers.

So what do I see. Since 1990 in Australia food, booze, vegetables, meat, fuel, health services and tobacco has got much more expensive. Appliances and equipment have got really cheap. A kilogram of rump steak a decade ago might have been $9-99 today it is $22-00. Apples 5 years ago were $2-00 a kilogram - they are $4-00+ today. Food, services and fuel have become much more expensive. But a 5.1 megapixel camera can be had at Tandy's for less than $100 compared to $1600 on their first release while a cordless scredriver can be had for $8-00 - a few years ago it was over $100.

Part of the reason for big price increases are resource constraints - fuel has shot up and food prices have risen strongly perhaps because of global warming. I've read that the price of a dozen eggs will rise 50 cents over the next few weeks because of the drought. Equipment, consumer durables, whitegoods, cars however have collapsed in price partly because of technological innovation and partly because of well vast stocks of surplus labour in China. Many of the the cheap things we buy come from China.

Of course these Chinese goods are cheap in terms of their private costs - in terms of social costs, defined inclusive of pollution and global warming, they are much more expensive. The Chinese are environmental grubs who damage the planet to keep their exports booming and Western consumers well-equipped with gadgetry!

So our living standards are suffering partly under the impact of pewhaps resource constraints and environmental pressures but our material living standards are being underpinned by technological change and the huge supplies of surplus labor in China who mess up the planet but who supply us with gadgetry at low private cost.

This can be checked out easily by going to the ABS website and examining price trends on categories of good 1990- 2006. Overall prices over this period rose 54% but:

  • Tobacco prices rose 313% and, guess what, smoking as a habit has continued to disappear.
  • Health costs rose 136%.
  • Fuel prices rose 89% - mainly in the last few years.
  • Booze prices rose 73%.
  • Food prices overall rose 74% but veggies rose 124% and don't blame ust the bananas.
  • Housing prices rose a modest 31% - is this an ABS artifact or does someone know why this seems so low?
But look at the gadget prices:

  • Appliance costs rose a miserly 7%.
  • Equipment prices fell a dramatic 74%. Yes, that's what the ABS says.
Thank goodness for the Chinese entrepreneurial spirit. Their low gadget prices have helped secure our living standards even if the poisons they emit into the atmosphere might kill us all eventually. Thank God for godless communism.

And thanks Louise for getting the ABS data.


Sean said...

How does a 1.6 degree rise in global temperatures in the last 100 years affect the price you pay at the grocery store? If CO2 goes up, plants grow better and food prices go down. Check your logic.

hc said...

Sean, We are in the midst of one of our worst ever droughts which some associate with global warming.

CO2 doesn't just provide an input for plant growth - it also influences global temperature, rainfall and climatic extremes.

conrad said...


You keep on complaining about other groups when its pretty clear which way the finger should point first (I'm glad you put the MQ Island story up a few days ago). The fact that China creates a lot of pollution is no real surprise given their population. Alternatively, you might like to see which country produces the most C02 per head in the world. You might also like to look at extintion rates. etc. More obviously, I notice a fairly healthy level of smog floating around the comparitively tiny city of Melbourne these days, simply because the government won't introduce simple laws (like not burning wood fires in the city -- even Chinese cities can do this).

At least this time you are willing to mention who the happy complicit consumers of these goods are.

chrisl said...

Harry My wife,who works in the health system found a diary from 20 years ago and she seemed to be earning MORE then than she is now. Perhaps it was because her rate then was a casual rate.
Also I pay a casual worker less per day now than I did 15 years ago.
Please explain

chrisl said...

Conrad I don't think the smog over Melbourne is caused by wood fires on a 27 degree day. Re-post in winter and you may have a (small) point

chrisl said...

Harry What caused the droughts Before global warming?

hc said...


If your wife is unskilled and works in the traded goods sector then she faces increased international competition. Otherwise I don't understand - I'd like to carefully check out your claim. Ditto the casual worker - those without skills are punished.

I wasn't saying droughts have always been caused by warming and am unclear this one has. Its debateable. Read carefully what I wrote. 'Droughts and flooding rains' generally due to El Nino.

conrad said...


I work 5ks from the city on the 10th floor of a building, and get to see Melbourne every day.

There might be small amounts of smog in summer (excluding bushfires), but I was quite surprised by how disgusting Melbourne was in winter. In addition, I can tell the different types of smog via the smell/effect (don't work in Asia too long), and I'd be pretty certain its from burnt wood -- which has basically one source -- which is incidentally banned in some cities for this very reason (like Hobart I believe).

chrisl said...

Harry, It says in her diary that she cleared $265 for a Friday night working as a Div2 Nurse.
As an asdide, we managed to save 20K twice, once for a house deposit and once for a trip overseas. These days we would be lucky to save 2 bob.

Matt Canavan said...

Harry, on the housing prices I conjecture that your 1990 starting date was almost at a peak in the cycle. Housing prices in real terms fell in the early 90s and really didn't recover 'till the late 90s.

Francis Xavier Holden said...

"....but by pulling hard-earned $ bills from my back pocket at cash registers..."

C'mon Harry. It's 2007. Where's the cash card?

Francis Xavier Holden said...

"Booze prices rose 73%."

Some of the figures don't cmpute with my talkback size mind.

I can remember being overjoyed to buy brand name $4 a bottle plonk in 1990, which in retrospect was wrose than 1970's flagon quality.

Now I can buy objectively great-ish tasting cleanskins for $5 a bottle.

What comprises a househould basket of booze? (Two baskets in this household)