Many Western Australians will remember 2006 as the year that two major commodities pinched their hip pocket nerve – petrol and bananas.
Many Western Australians will remember 2006 as the year that two major commodities pinched their hip pocket nerve – petrol and bananas.
The banana was transformed from staple dietary item to a luxury indulgence in March, when tropical Cyclone Larry crossed the Queensland coast near Innisfail, decimating 80 per cent of Australia’s banana crop.
With stocks down by about 200,000 tonnes, banana prices soared to record highs within days of the cyclone, and the flow-on effects were felt almost immediately in WA.
The cost of bananas nearly tripled during the June quarter, while some citrus fruits and berries also increased in price, as consumers sought substitutes for bananas.
Rising fruit prices contributed to an increase in the consumer price index, while Perth’s rate of consumer price growth surpassed the rest of the nation due to soaring house prices.
Following a rise of 1.0 per cent in the March quarter, Perth’s CPI rose by 1.8 per cent in the June quarter, the largest quarterly rise in six years, and again by 1.1 per cent in the September quarter.
Each of the three rises exceeded the national rate of growth, which was 3.9 per cent for the year to the September quarter, compared with Perth’s rate of 4.8 per cent, which was second only to that of Darwin.
The Reserve Bank of Australia’s upper target for inflation was surpassed in 2006 when the national CPI passed 3 per cent, prompting the bank to enact a series of cash rate rises.
This calendar year, the RBA introduced three 25 basis point rises, taking the official cash rate from 5.5 per cent to 6.25 per cent, the highest point in a decade.
The rises in May, August and November reflected the bank’s concern about rising inflation, although the RBA announced this month that the cash rate would remain steady at 6.25 per cent.
While domestic price issues forced up the CPI, a spike in world crude oil prices dealt a heavy blow to domestic petrol prices this year.
A combination of rapidly rising levels of demand and international tension over Iran’s nuclear program in March and April prompted talk of a third global oil shock, to match those of 1973 and 1979.
According to data from the Department of Consumer and Employment Protection, unleaded petrol prices in the Perth metropolitan area reached a peak average price of 135.6 cents per litre in May, with a low of 112.7 cents per litre in November.
Motor Trade Association of Western Australia executive director Peter Fitzpatrick said that, while rising petrol prices significantly affected the community this year, it may be a sign of things to come.
“There’s no doubt that petrol prices during the year were highly inflationary and did have an impact on consumers and business,” he said.
“When oil prices were around 80 dollars a barrel, it was a cause of great concern.”
Mr Fitzpatrick said the combined effect of increasing demand from emerging economies and demand from the US could have a big bearing on the general business community.
“We are living in a world where it is harder to keep up with demand from emerging economies like China and India,” he said.
“The only upside of all of that is China’s demand for oil is being driven by its major industries, and those rely on WA commodities. We’ve managed to balance one against the other – the commodity market has been strong, yet is causing China to want more and more energy.”
Mr Fitzpatrick said it was inevitable that oil prices would rise, due to increasing demand from emerging economies, necessitating the consideration of alternative energy sources.
“I think that one of the lessons to come out of the year is we need to look carefully at our energy sources. We need greater use of gas and renewable sources and we need to look at the nuclear option,” he said.
