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Yes, we could have bananas - if only the Government would let us

By Saul Eslake - posted Wednesday, 16 February 2011

Imagine if, in the aftermath of the collapse of Ansett in September 2001, Qantas had raised its airfares by 500%, and kept them there until Virgin Blue (or some other airline) had increased its capacity by enough to make up for that lost upon the demise of what had been Australia’s second domestic airline. There would have been enough Wailing and Gnashing of Teeth to make the reaction to banks raising their mortgage rates by more than the official cash rate look and sound like the raising of a few eyebrows. The ACCC would have been down on them like a ton of bricks.

Actually, Qantas did no such thing. But it is exactly what those banana producers who weren’t affected by Cyclone Larry did five years ago. And it’s what those banana producers not affected by Cyclone Yasi appear to be set to do in coming months, albeit perhaps not on quite the same scale, given that it would appear that a smaller proportion of this year’s crop has been wiped out by Yasi than was by Larry. It’s also what producers of a variety of other fruit and vegetables not affected by the earlier Queensland floods have already begun to do.

Let’s be clear: the higher prices which we are all now paying for fruit and vegetables will not, for the most part, do anything for the producers whose crops have been damaged or destroyed by floods and cyclones, the ones who are deserving of our sympathy and support.  Rather, the revenue from these higher prices will go to growers elsewhere in the country who have not been affected by floods and cyclones.


Those higher prices will put upward pressure on inflation, although (fortunately and properly) the Reserve Bank has indicated that it will ‘look through’ (that is, ignore) these effects when assessing the need or otherwise for changes in interest rates at its monthly Board meetings.

But that may be of little comfort to households already ‘battling’ or ‘shtruggling’ (as politicians feel compelled to say these days) with rising electricity, gas and water bills, ever-increasing health insurance premia and higher mortgage interest rates or rents, who will be obliged to pay substantially more for these fruit and vegetables, or (alternatively) go without them.

Yet this behavior on the part of primary producers who have been entirely unaffected by the recent examples of Nature’s wrath attracts no opprobrium whatever. Words such as ‘greedy’, ‘grasping’, or ‘price-gouging’, routinely applied to (for example) banks, oil companies and airlines, pass nary a lip when it comes to fruit and vegetable growers.

Yes, these movements in fruit and vegetables are the result of ‘supply and demand’. But no less so are movements in mortgage rates, petrol prices and the various ‘add-ons’ that with which airlines routinely get away.

I suppose the difference reflects the fact that when it comes to fruit and vegetables, we’re talking about ‘our’ farmers, who have been ‘doing it tough’ through drought and now tempest - as opposed to someone else’s big, profitable corporations, run by highly-paid suits -  so that we don’t begrudge them the occasional opportunity to indulge in a spot of  ‘price-gouging’.

It doesn’t have to be this way.


The Government could minimize the impact of the Queensland floods and Cyclone Yasi on the prices of fruit and vegetables whose domestic supply has been sharply reduced, by allowing sufficient supplies of those fruit and vegetables to be imported, until domestic production has recovered to normal levels.

Of course, the Government would have to be prepared to weather the storm of outrage and protest from those whose opportunity to profit from their fellow-growers’ misfortunes would be thereby circumscribed, and from crude populists like North Queensland MP Bob Katter. That storm would probably rival Yasi in its intensity.

Those who do seek to profit from the misfortunes of others (or to secure their votes) will no doubt trot out the usual canards about ‘biosecurity’ and the ever-present threat of disease associated with ‘third world’ fruit and vegetables.

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(Article by Saul Eslake, Director of the Productivity Growth Program at the Grattan Institute, published in the business pages of the Melbourne Age newspaper, and in the online edition of the Sydney Morning Herald, under a slightly different heading and with some other editorial amendments, on Monday 14th February 2011)

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About the Author

Saul Eslake is a Vice-Chancellor’s Fellow at the University of Tasmania.

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