Tried to buy a car lately?
No chance, there is a 6-18 month wait.
Over the last 50 years, when you went to a dealership, cars were just sitting there waiting for you to walk in.
When you went to buy toilet paper or dog food, they were happily waiting for you on the shelf… oh the good ole days!!!
Today, every single economy across the world is plagued by shortages and dysfunction.
Everything in the world right now is SHORT.
If you own property, the question you need to know is ‘how did we get here?’, and more importantly… what now?
I will give you a clue.
First word Pan, second word, rhymes with Jeff Fenech.
During the two years of the pandemic, governments around the world imposed restraints on supply chains. Many countries across the globe were in and out of some form of lockdown. With industries shutting down for weeks to months.
As the world started to emerge from its economic hibernation at the beginning of 2022, it was game on!
We wanted everything and we wanted it all at once. We were booking flights, making reservations and partying like we thought we would in 1999.
Inflation is usually caused by immense pent-up demand and a shortage of supply, which in turn drives prices up. Late 2021 was the perfect melting pot for inflation – on a very global scale.
Inflation is also usually characterised by excessive wage growth, however, we have had weak real wage growth for over a decade now. Our high prices are the result of fiscal stimulus and shortages of materials and workers. These are supply constraints caused by the pandemic and the war in Ukraine.
So, as we take a bigger picture view of how we got here, you can see that many of these price increases are one-off or short-term reactions, and import prices will fall soon enough as pandemic disruptions and the war in Ukraine eases.
The Reserve Bank and its Chairman know this, and they know that the 5.1% inflation reading is a high number and one that long term must be brought down. The Reserve has a target for inflation of 2-3% a year, and just as the economy was below that target for six years, if we are above that number for a year or two, that’s ok as well.
In the meantime, if you would like to speak with one of our Lending Specialists about a loan to buy some lettuce, please reach out.