We’ve been bleating about getting ripped off for years yet when one player, Tesco, albeit propelled into action by cross border competition, starts a price war, the airwaves are full of alarm from producer groups and their allies. Once again consumers are ignored - that prices are about to fall sharply, helping out low wage Irish families, is swamped by forecasts of damage to the food industry.
Let’s keep perspective
- If the Groceries Order wasn’t removed this long awaited price war would have been impossible as suppliers protected prices. After 18 years of phoney competition it has taken four years and a recession to reach this tipping point.
- Irish food middlemen and processors can’t be artificially protected by Government intervention. When the other team has the ball you don’t complain to the ref, you compete. Otherwise we end up paying subsidies to businesses through higher prices and our most vulnerable citizens pay most.
- Dunnes, operating an unreformed 1980’s distribution model where suppliers deliver to individual shops will be sold. Cause they’re Irish will have nothing to do with it. Dunnes made huge margins and didn’t do enough to compete.
- Competition law is there to tackle market abuse and beats clandestine lobbying by vested interest groups hands down. So let’s leave Tesco to the laws we’ve passed through the Oireachtas and not to some stitch up.
Evidence is mounting, the latest being from Central Bankers, that the global economy is stabilising and that the key US economy may begin to pull out of recession as early as this summer. Three stories of recovery now seem likely;
- A saucer-shaped recovery in places most affected by the credit bubble including many OECD countries like the US and UK.
- A v-shaped recovery in fast growing non-OECD countries like China, India and the developing world. Other low debt countries like Germany likely to come back quickly.
- Big problems still remain in black spots most heavily exposed, that includes Ireland, Spain, Greece, Latvia, Estonia and Eastern Europe.
So what does this mean for you?
Time to lock into long term fixed rates. As expectations of inflation reappear especially in Germany the ECB will begin to raise interest rates. It’s a hard decision to make when variable mortgages are so cheap and are effectively cushioning you from the vicious bite from increased taxes on your income but if you can manage it I believe you’ll be dining out on your action for years to come especially if you can get ten year rates at 5% or so.
Not conventional thinking, but I reckon that the speed of inflation is going to surprise. Already oil is creeping towards €60 a barrel despite the downturn. That means a changed world as prices rise beginning with food later this year and oil next year. So how can you take advantage rather than just sit and take the hit?
- Anything you can do now to invest in energy efficiency even something as simple as attic insulation or cavity wall injection will pay back quicker than you expect.
- Downsize to a compact car with much better mpg
- Switch some of your pension or savings to energy funds and those that invest in natural resources like food, metal, oil & gas and green energy.
- Take some cash from your deposit savings and buy some gold.
- Move home closer to work or public transport