Motorists strung by the rapidly rising price of petrol are likely to be even more diligent in collecting those amazingly successful supermarket fuel discount vouchers.

However, a visit to the supermarket, rather than reducing financial pressure, is only likely to add more financial pain. Food prices have been rising faster in Australia than virtually any other household budget item.

The food price index increased by 2.1% in the March 2008 quarter alone and by 11% in the last 2 years, well above the general rate of inflation. It should not come as any great shock that rising fuel prices are going to be reflected in even higher food prices because the food system in Australia from production through to purchase is so dependent on fuel thirsty processes.

Fuel is estimated to account for around 45% of the total costs of producing the raw commodities in Australia and when transport, processing and manufacturing, packaging, distribution and other fuel costs are added in it is easy to see how, in a big country like Australia, that food prices can only continue to soar with rising fuel costs. Even the way we purchase our food from large regional supermarkets involves extra fuel costs from the use of cars.

However, rising fuel costs are not the only factor driving the increase in food prices in Australia. Food shortages caused by the drought, together with the increasing cost of water, fertilizer and animal feeds (and possibly the increasing concentration of our food retailers) have all been putting upward pressure on food prices.

International factors are also playing their part as well. There has been a massive increase in demand for imported food from China and India which, when combined with allocation of grains to animal feed and bio-fuels production, has created a world shortage. Reduced investment in food production due to the credit crunch and speculators seeking to profit from the shortages have also played their part in rising international food prices.

These pressures have already created a crisis in some of the poorer resourced countries and led to the down fall of at least one prime minister. It is unlikely to get that bad in Australia but as many of these price factors have yet to be reflected in the cost of the food at the supermarket, you can expect the situation to get a whole lot worse.

Rising food prices could present the Australian government with more social problems than the cost of petrol. There are some strategies (albeit unpalatable ones) which can assist consumers reduce their spend on petrol. However, food is a daily necessity with costs that cannot be avoided.

You might be thinking that with such high rates of overweight and obesity in Australia, rising food prices may actually achieve some good by encouraging us to eat less food.

In fact, research has shown us that rising food prices are more likely to have the opposite effect on weight and health. Australian households spend 18.2% of their income on food and non-alcoholic beverages (well in excess of expenditure on petrol).

However, the lowest income bracket spend proportionally more of their disposable income (more than 20%) on food.

In 2004, Victorian researchers estimated that the mean absolute weekly food expenditure was $127 but found that the average weekly cost of a basket of food to provide a nutritionally adequate intake for a family of six was $180.

It is not surprising that despite living in one of the wealthiest countries that one in four low income families report that they often run out of food between pays and cannot afford to buy more. The increasing demand on charities for emergency food relief is testament to a food insecurity problem that will only get worse with rising food prices.

Even in more food-secure families, rising food prices are likely to contribute to changes in food purchasing behaviours that will worsen obesity and chronic disease problems associated with poor nutrition.

Although the price of almost all food products has risen in recent times the size of the increase has not been equitable across all food groups. Fresh produce is more sensitive to increases in production, transport and storage costs and thus the price of these products has been rising fastest. Vegetables, fruits, milk, beef, bread and rice have all risen steeply with basic commodity prices around 25% higher than last year, whilst processed products based on sugars and fats less so.

Most consumers are now feeling the pressure of food prices and seeking to reduce food costs and this will often mean purchasing less high nutrition, low calorie fresh produce (such as vegetables, fruits, milk etc) and a higher proportion of lower nutrition, high calorie processed foods, take away foods and snacks. Hence shrinking wallets and expanding waistlines.

So while the Government invests significant time and effort in finding ways of reducing motorists’ fuel bills by a few dollars a week to demonstrate their empathy, they are distracted from a potentially much larger social, health and political problem just around the corner.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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