What Coles’ $1 pasta tells us about inflation

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OPINION: Customers at Coles are trading down to cheaper products as inflation bites. Chief executive Steve Cain says price growth will ease, but not for six months.

Praise be! The humble iceberg lettuce is back on the shelves of Coles Supermarkets, with chief executive Steven Cain revealing that prices are heading back toward about $3 per head.Coles chief executive Steven Cain is watching prices closely.showed food inflation surged to 4.3 per cent in the June quarter, due to a combination of supplier price rises and fresh produce shortages caused by flooding in NSW and Queensland.

There’s also been a subtle shift from fresh fruit and vegetables into canned and frozen options, and customers have moved away from more expensive cuts of meat. Cain says a neat example is a shift from beef mince into cheaper chicken and pork varieties. These early signs of trading down might also give the Reserve Bank pause. The big danger for governor Philip Lowe is that inflation expectations become embedded, which leads to a situation where consumers feel they need to push for ever-higher wages, and businesses need to keep pushing prices upwards.

 

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