Why a piece of bread, half an avocado and crumbs of feta costs $16

Wed, 08 Feb 2017  |  

This article first appeared on the Yahoo7 Finance website at this link: https://au.finance.yahoo.com/news/why-a-piece-of-bread-half-an-avocado-and-a-few-crumbs-of-feta-costs-16-045746860.html 


Why a piece of bread, half an avocado and crumbs of feta costs $16

Have millennials trimmed their spending on smashed avocado brunches and other food indulgences and started saving for a house?

No one can be sure, but there might some tentative evidence that the smashed avocado debate of last year had some influence on consumption patterns and not just away from smashed avocadoes, but overall spending in restaurants and on takeaway food.

The retail sales data shows that spending in cafes, restaurants and take-away food shops has dropped in recent months. In October last year, when the smashed avocado debate reached its pinnacle, spending in cafes, restaurant and on takeaway reached a record high $3.6383 billion.

In November, spending was $36.6 million lower than this peak, while December spending was still down $30.7 million from the October high. Something was happening in this segment of retail trade.

This weakness was not the result of some overall, broadly based weakness in consumer demand – retail spending outside cafes and restaurants jumped $74.8 million in November and in December was still $48 million higher than in October. The economy continued to trundle along, with retail sales growing at a moderate pace.

There was something specific to cafes and restaurants in those two months that could otherwise explain the spending decline. It could be the community acknowledging that some financial sacrifices are needed if people are ever going to be ever able to afford their first house.

Eating out and buying takeaway coffee is really nice, which probably explains why so many people do it. But as I wrote in my 2015 book, Myth Busting Economics, when you go to a café or a restaurant, that $50 you spend for two people includes the cost of the labour of the chef and waiter, the rent of the café, the electricity in the coffee machine and blender, the businesses insurance, the interest on the overdraft, the plates, the cups, the tables and chairs and cost of cleaning the shop plus a lot more.

And of course, the café owner needs to add in a margin for profit so they can pay themselves a wage. This is why the 30 or 40 cents of inputs into a cup of coffee turn into a selling price of $3.50 or more and why a piece of bread, half an avocado and a few crumbs of feta, which would probably cost $4 or so at the local supermarket, is marked up to $16, $18 or even $20.

The key issue on housing affordability remains saving for the deposit. Once people have a loan and buy a house, affordability is currently very favourable – low interest rates are a huge benefit for new mortgage holders even with a large loan. Saving a deposit for a house, for a given income, means, by definition, spending less today, saving more today, so that a deposit can be accumulated.

Sure, it is difficult to save and not much fun, but for anyone who wants to buy a house, saving the required deposit means spending less elsewhere.

Maybe people are starting to do that and are trimming their spending on eating out. Let’s wait for the next few months of retail sales data to see whether this continues.

comments powered by Disqus


The misplaced objective of the government of delivering a surplus, come hell or high water, has gone up in smoke

Tue, 07 Jan 2020

This article first appeared on the Yahoo Finance web site at this link: https://au.finance.yahoo.com/news/the-governments-test-in-2020-220310427.html   


The misplaced objective of the government of delivering a surplus, come hell or high water, has gone up in smoke

For many people, the cost of the fires is immeasurable. 

Or irrelevant. 

They have lost loved ones, precious possessions, businesses and dreams and for these people, what lies ahead is bleak.

Life has changed forever.

As the fires continue to ravage through huge tracts of land, destroying yet more houses, more property, incinerating livestock herds, hundreds of millions of wildlife, birds and burning millions of hectares of forests, it is important to think about the plans for what lies ahead.

The rebuilding task will be huge.

Several thousands of houses, commercial buildings and infrastructure will require billions of dollars and thousands of workers to rebuild. Then there are the furniture and fittings for these buildings – carpets, fridges, washing machines, clothes, lounges, dining tables, TVs and the like will be purchased to restock.

Then there are the thousands of cars and other machinery and equipment that will need to be replaced. 

What's ahead for the Australian economy and markets in 2020

Thu, 02 Jan 2020

What's ahead for the Australian economy and markets in 2020

Happy New Year!

2020 will be a year where Australia’s annual GDP will exceed $2 trillion, our population will get very close to 26 million people and we will clock up 29 years with no recession.

It is also a year where the economy will be a dominant issue for policy makers, will drive what happens to interest rates, will help drive investment returns and will feed into the well-being of the Australian community. 

2020 kicks off with relatively good news in terms of economic growth, even though the labour market is likely to remain weak, with wages growth struggling to lift and inflation remaining below the RBA’s 2 to 3 per cent target. The Reserve Bank may have one more interest rate cut in its kit bag, but by year end, the market is likely to price in interest rate increases, albeit modestly.

The ASX, which had a great 2019 is set to be flatten out, in part driven by the change in the interest rate outlook, but it should get a boost from better news on housing and household spending.

In terms of the specifics, I have broken down the 2020 outlook into a range of categories and given a broad explanation on the issues underpinning the themes outlined.

GDP Growth

It’s a positive outlook. A pick-up in GDP growth from the current 1.7 per cent annual rate is unfolding, with the only real issue is the extent of the acceleration.