The monthly TD Securities-Melbourne Institute Inflation gauge rose 0.2% in December. One of the drivers was food and vegetable prices, which climbed 2% last month, even before the so called 'weather event'. So the January read will be closely watched.
At the moment, it's too early to tell what the full impact will be, given the ongoing floods across Queensland, western Victoria, Tasmania and northern New South Wales.
Food organisation, AUSVEG, said late last week that on whole, vegetable prices are stable. The bad news is, if you're a lover of sweet potatoes, ginger and pumpkins, then get ready to pay more - they'll be in short supply. Melon and lychees prices will also be affected, and beetroot too may be swayed. The Lockyer Valley, where 90% of Australia's beetroots are produced, was one of the worst flood hit areas.
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Analysts at Commsec point out that we'll only really know the full impact once we see what the autumn and winter growing season produces in Queensland.
They say we may see a period of high and rising food prices in the second half of this year and into next, and that it will be up to the government, both federal and state, to keep a close eye on the situation. One solution might be temporarily relaxing controls on fresh food imports.
Still, Commsec is expecting the Reserve Bank to hold fire when it comes to interest rates, for at least the next three months.
