Food prices decline globally
The Spectator reported that world food prices declining for a 12th consecutive month in March.
With oil prices well down from their highs, and shipping container costs falling -87 per cent from their peak, there's growing real-time evidence that global inflation has been replaced by disinflation.
Wen deflation?
The natural response to The Spectator's Tweet is to note that we haven't seen food prices fall at Woolies in Australia.
As far as I can tell, food prices in Australia have remained high, although at least they aren't rising any more.
At least part of this would be due to a lag, with Australia keeping on and on and on with international border restrictions, long after the rest of the world had abandoned such restrictions and moved on.
Base effects
As Governor Lowe has previously pointed out, when prices stop rising then eventually inflation falls back to zero on a year-on-year basis.
By way of an example, this week I paid 173.9 cents for a litre of Unleaded fuel on the Sunshine Coast.
Some are still paying nearer to $2 in the capital cities, and we're still higher than the pre-pandemic level of closer to $1.50/litre, but on recent evidence it won't be too long before the year-on-year price change drops back to nil.
Housing construction costs experienced double-digit growth in Australia last year, but sky-high trades and materials prices will begin to decline here as activity fades and the supply of materials increases, while the retail sector is now arguably in a recession too.
Looking further ahead, some of these tailwinds for inflation will start to become headwinds, and it won't be too far down the road that interest rate cuts are back on the table to stimulate slowing economies.
