It came as no surprise that The Sunday Times reported yesterday the price of Malta’s traditional bread will also be going up soon, though there might be a baker or two who will try to absorb rising costs. The increase will come hard on the heels of hiked fuel and milk prices. I fear this will only be the start of the story.
We have entered a year which will probably see a vicious circle developing, against an international backdrop quite less rosy than some have been making out. As we moved into 2011 our rate of consumer prices inflation was already substantially higher than that of the European Union as a whole.
An acceleration is expected there, and it seems we will also be part of that. In large part the cause will be developments in the crude oil price, which spills into derivatives, of gas, and in our supply markets. The cost of food, for instance, is on the up and up, driven by higher cereal prices which have fed into those of staples like meat.
There is nothing we can do to counter internationally rising prices, except trying to ensure that we purchase our imports as efficiently as possible. Landed here they have to be on-processed, where that applies, and distributed efficiently as well. With the degree of competition that exists in most of the private sector it can be assumed that the price of its products to consumers will be as keen as can be. Otherwise price-conscious consumers will reply by shopping elsewhere.
Enemalta’s monopolistic supplies are another matter. There remains doubt that the corporation is buying fuel and generating electricity as efficiently as could be. No doubt, it is trying to do so. Whether it is succeeding remains a matter for discussion and controversy.
The upward trend in prices, not infrequently translating into higher production costs and consumer prices, constitute the vicious circle I referred to, burdening everybody but particularly those who are already living in or at the margin of poverty.
Reacting to union demands for a fuel supplement and to revise the weightings (importance given to categories spending) in the Retail Price Index (RPI) the government has commissioned a report on inflation which it targets for discussion in March. That is understandable in regard to a possible RPI revision. It is far less so in respect of a fuel supplement.
Sharply higher gas and kerosene prices, for instance, are felt as winter bites. That our winter is comparatively mild does not ease the discomfort of those who cannot heat their homes to a reasonable level in the cold spells. The government already offers some assistance regarding water and electricity bills. That does not cover heating with gas and kerosene. It is a sad but real fact that the government cannot help everybody, which seems to be what the unions are suggesting regarding fuel prices – that will happen after higher prices are reflected in the 12-month RPI as at the end of September, and the statutory COLA increase is then given 12 months from now, affecting also welfare payments.
That is a long time to wait. Meanwhile those who suffer most will sink further. There should be broad agreement that the poorest must be protected against undue hardship. After providing for that, economic realities too have to be taken into account. Inflation will not be the only big problem this year. The Financial Times of London reported on Saturday that unemployment in Europe has remained at or above the 10 per cent mark since April. Economists forecast it will stay at that level for much of 2011, if not rise modestly. Lingering unemployment will act as a brake on Europe’s growth, mainly by throttling consumer spending.
That could affect our exports and tourist arrivals, threatening the health of the economy. Whatever the circumstances, social considerations must be kept to the fore, such that even reduced financial resources are allocated on the basic principle of fairness, starting with need.
The government has a very hard balancing act to attempt, including to explain and convince that it is doing so correctly. People will not feel the pain of the situation less, but might find it less difficult to understand the predicament we are in if the authorities set the example, as they always should, by cutting out waste, postponing dubious projects and exercising restraint over what they pay themselves.