Monday, 30 January 2012

Supermarket food discounting to bias inflation lower

There is a simple macroeconomic effect of the food price discounting from the big supermarkets - inflation will be lower.  See the story here

If the discounting or bias to lower price increases is a structural change reflecting productivity or the onset of healthy competition, interest rates will also be biased a bit lower.

What is also important is that the purchasing power of consumers will be higher.  Cost of living pressures will subside.  In a period where Australia has seen a decade straight of real wage increases, massive income tax cuts and pension rises, consumers are doing very well thank you - a trend that is only going to be enhanced with lower food prices and a bias to lower interest rates.

I can't see what's wrong with it other than for the few price gougers who are being found out by the supermarkets. 

1 comment:

  1. Very admirable post. Thanks for sharing. You have plenty of ideas here to be take note and follow.

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