Showering gifts on your true love has never been so expensive.
The carol The Twelve Days of Christmas, in which a deep-pocketed and clearly besotted person delivers a combined 364 gifts to the target of their affection, is often used by sombre economists to track the cost of living.
Covering as it does everything from poultry (the French hens) to highly trained artists (dancing ladies), the 18th-century carol’s laundry list of gifts embraces most parts of a modern economy and its price pressures.
According to the jolly folk at KPMG, the total cost this year of spreading Christmas love has climbed almost a third to a budget-busting $327,260. Last year, all the gifts came in at “just” $248,244. That’s an increase of 32 per cent.
But, in a development that would cause problems for the inflation fighters at the Reserve Bank, the big lift in prices is not widespread.
KPMG chief economist Brendan Rynne said gold and avian flu had caused havoc to gift givers’ budgets.
Gold prices hit an all-time high this year, climbing by more than 60 per cent over the past 12 months. On December 1 last year, an ounce of gold was worth $US2650. Twelve months on, it had reached $US4235.
The advent of avian flu, which has been felt domestically through high-priced eggs, has hit wild bird populations around the world. That has then forced captive bird breeders to cull their flocks.
Rynne said these two factors alone were the driving force behind the sharp lift in the cost of the carol.
“If the cost increases associated with the price of gold (affecting the five gold rings) and birds (impacting the partridge in the pear tree, turtle doves, French hens, calling birds, geese, and swans) are excluded from the analysis, then the annual cost increase for the Twelve Days of Christmas gifts would have only been 0.5 per cent,” he said.
Rynne noted that while the prices of manual labour might not be climbing sharply, the lack of productivity growth meant there was no meaningful real fall in prices from the service part of the carol.
“Moderate pay rises through the year for milking maids, dancers, leaping lords and musicians has also helped in the containment of costs, although given the same number of performers are being employed for the 12 days of festivities, there does not seem to be any productivity improvements helping alleviate this year’s inflation spike,” he said.
“That’s an issue consistent with the broader Australian economy.”
Those in the market for gold rings might have to bite the bullet and buy now rather than hope for a price correction.
ANZ commodity analysts Soni Kumari and Daniel Hynes believe that after this year’s 60 per cent surge in the price of the precious metal, it could rise by between 12 and 15 per cent in the coming year.
That would push the price to about $US4800 an ounce (or $7300).
“Investment and central bank gold purchases are expected to remain robust, supported by looser monetary policy, a weaker US dollar, fiscal uncertainty and geopolitical risks,” they said.
“Further, despite a strong equity market outlook, investors will continue to diversify into gold to hedge against any surprised downside risks.”
While the Reserve Bank is unlikely to be swayed in its thinking on interest rates by expensive geese and leaping lords, financial markets expect it to lift interest rates by the middle of next year.
Some economists, including those at the Commonwealth Bank and the NAB, are firmly in the Grinch camp, tipping a rate rise as early as February.
Much will hinge on inflation figures due to be released by the Australian Bureau of Statistics on January 28.
Rynne warned that lifting interest rates to bring down inflation at the moment may fail because inflation is not being driven by normal demand pressures.
“Normally, a big jump in Christmas prices would lead the RBA to raise interest rates several times to cool spending and bring festive inflation under control. But a closer look shows that most of these price increases come from supply issues, not demand,” he said.
“That means changing interest rates wouldn’t do much to bring Christmas costs down.
“KPMG therefore recommends the RBA adopt a sit-and-wait approach for near-term monetary policy decisions until these non-controllable factors work their way out of the Christmas calculation of inflation.”
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Disclaimer : This story is auto aggregated by a computer programme and has not been created or edited by DOWNTHENEWS. Publisher: www.smh.com.au
