It is understandable for people to look forward to things returning to normal when they are in the midst of a crisis – but sometimes the scale of what happens is so big that at least part of the change is permanent, or at least long-lasting.
So it is when it comes to the cost of living crisis and, more particularly, the price of food and groceries in supermarkets. That is the area where some of the most dramatic price spikes over the last 18 months have been seen, with the spiralling cost of groceries leaving most households over ¤1,000 poorer annually.
Grocery inflation came close to 17 per cent in May, according to retail analysts Kantar, with prices driven higher as a result of soaring energy and transportation costs along every link of the supply chain, as well as food security and energy concerns prompted by Russia’s invasion of Ukraine and the climate crisis. A post-pandemic spike in demand only exacerbated this.
Although a decline in grocery inflation is under way – with the rate falling to just under 13 per cent now – any notion that prices will revert to levels we grew accustomed to over a decade up to 2020 seems fanciful.
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While input costs have fallen significantly in recent months as global markets factored the war in Ukraine and the sanctions on Russia into their pricing models, many remain high compared to what we became used to.
The harsh consequences of climate change and the damaging impact on key parts of the food production chain will come into sharper focus in the years ahead. Meanwhile, the conflict in Ukraine shows no sign of being resolved and pressures are evident across the world. For example, concerns over soaring prices have prompted the Indian government to impose dramatic restrictions on rice exports, which will heap more pressure on some of the poorest people on the planet and have a knock on impact on prices.
International volatility will continue to be reflected in higher input costs and higher prices for consumers in Ireland. Industry experts speculate that the best we can hope for is grocery inflation of 3 per cent per annum over the next five years.
There are two major policy implications here. The first is responding to climate change, both by considering the impact of our own food production methods and also the supply chains feeding Ireland. The uncertainty caused by the Ukraine war and related concerns about the security of supply make this a complex issue.
The second is how to respond to the impact on households. As with energy prices, Ireland is poorer due to the global rise in food commodity prices. Everyone cannot be compensated and so policy needs to focus on helping those who are most in need and to reflect the likelihood that higher food prices are here to stay.