No more free lunch

Today's paper full of economic gloom. One story claimed that the era of cheap and plentiful food was over. It quoted a UN report declaring most agricultural commodity prices in the next decade would exceed the average of the previous decade by up to 50%. World food price have increased an average of 83% in the last three years.

A second headline reported that a typical basket of food in the UK has increased by 6% since January. Fresh fruit and vegetables are up almost 16%, with cauliflower up 44% and basmati rice up 33%. I was fascinated by the observation that the price of mouthwash had fallen by 10.2%

A third story predicts that UK house prices would fall by 20% over two years, following a record 2.5% fall in housing prices this month. A fall of this magnitude would throw one in six mortgage borrowers into negative equity. The price of housing in London has never failed to astonish me.

Meanwhile, the front page declared that the era of cheap airfares is over. Virgin Atlantic and British Airways announced increases in their fuel surcharges today. BA said that long-haul flights would attract a fuel surcharge of £218 for a return trip from next week. With oil prices at US$135 a barrel, surcharge increases were expected. However, this is the second increase in its surcharge in a month. At least one more increase is to come, possibly two.

Airfares have been extraordinarily cheap for years. I first flew to Europe in May 1990 with Royal Jordanian Airlines. At the time my return flight from Sydney cost A$1,860 (£885), a price considered incredibly good value. Fast forward exactly eighteen years. Tonight Air New Zealand is offering flights from London to Tauranga for £783. Incredibly, a trip requiring three separate flights, is more than £100 cheaper despite decades of inflation. It just doesn't make sense.