Cost of gifts soars due to gold prices and avian flu
Showering your true love with gifts has never been this expensive.
Divine The Twelve Days of ChristmasThis story, in which a deep-pocketed and clearly confused person delivers a total of 364 gifts to his loved one, is often used by gloomy economists to keep track of the cost of living.
Covering everything from fowl (French hens) to highly trained performers (dancing ladies), the laundry list of gifts from 18th-century carols embraces much of the modern economy and price pressures.
The total cost of spreading the Christmas love this year has risen by almost a third to a budget-busting $327,260, according to the jolly folks at KPMG. Last year, all gifts were “only” $248,244. This is an increase of 32 percent.
However, a development that will cause trouble for those struggling with inflation at the Central Bank is that the huge increase in prices does not become widespread.
KPMG chief economist Brendan Rynne said gold and bird flu were hurting gift-givers’ budgets.
Gold prices reached an all-time high this year, rising more than 60 percent in the last 12 months. On December 1 last year, the value of one ounce of gold was 2650 dollars. Twelve months later it reached $4235.
The emergence of bird flu, which was felt domestically due to high priced eggs, also hit wild bird populations around the world. This forced captive bird breeders to cull their flocks.
These two factors alone were the driving force behind the sharp rise in the cost of the song, Rynne said.
“If price increases for gold (affecting the five gold rings) and birds (affecting pear-tree partridges, doves, French hens, songbirds, geese and swans) are excluded from the analysis, then the annual cost increase The Twelve Days of Christmas “The gifts would only be 0.5 percent,” he said.
Rynne noted that although manual labor prices have not risen sharply, the lack of productivity growth means there has been no meaningful real decline in prices on the service side of the chantry.
“Decent wage increases throughout the year for milking maids, dancers, leaping lords and musicians have also helped keep costs under control, but given the same number of performers are employed across the 12-day festivities, there does not appear to be any productivity gains to help cushion this year’s rise in inflation,” he said.
“This is a problem consistent with the wider Australian economy.”
Those in the market for gold rings may have to bite the bullet and buy now rather than hoping for a price correction.
ANZ commodity analysts Soni Kumari and Daniel Hynes believe the precious metal could rise in price by 12 to 15 per cent next year, following a 60 per cent rise this year.
This would push the price to around $4800 (or $7300) per ounce.
“Investment and central bank gold purchases are expected to remain strong, supported by loose monetary policy, a weak US dollar, financial uncertainty and geopolitical risks,” they said.
“Moreover, despite the strong outlook for the stock market, investors will continue to turn to gold to hedge against surprise downside risks.”
While the Reserve Bank is unlikely to be swayed by expensive geese and leaping lords in its thinking on interest rates, financial markets expect it to raise interest rates by the middle of next year.
Some economists, including those at the Commonwealth Bank and NAB, are firmly on the Grinch’s side, predicting a rate hike could happen as early as February.
Much will depend on the inflation figures the Australian Bureau of Statistics will release on January 28.
Rynne warned that raising interest rates to reduce inflation now may fail because inflation is not driven by normal demand pressures.
“Normally a big rise in Christmas prices would cause the RBA to raise interest rates several times to cool spending and keep festive inflation under control. But a closer look shows most of these price rises are due to supply issues, not demand,” he said.
“This means changing interest rates will do little to reduce Christmas costs.
“KPMG therefore recommends the RBA adopt a sit-and-wait approach to short-term monetary policy decisions until these uncontrollable factors are eliminated from the Christmas inflation calculation.”
Shane Wright- Shane is the senior economic correspondent for The Age and The Sydney Morning Herald.Connect with: excitement or email.
