I’m about to become more relevant with the price of our morning and evening addictions about to rise, with that damn Coronavirus being the prime cause.

As an economist you can get excited or worried about issues that normal people don’t easily relate to – it’s part of the isolation that comes with the patch. However, when the economy hits normal people in the real world, then social ‘outsiders’ like economists and scientists become more useful to society.

The pandemic has made us comfortable with epidemiologists rabbiting on in the media nowadays —even if that 'epi word' is hard to say!

Announcements that the price of a cup of coffee and the cost of a cocktail is about to rise should be big news to normal people. These price hikes make that economic term called supply chain problems more understandable to normal people. These are the real developments that will drive another economic concept i.e. inflation higher in upcoming months.

This shines the spotlight on another economic issue normal people/borrowers worry about: rising interest rates.

These price rises are especially important to the big economic debate that Wall Street and global money markets are concerned about and that’s the question: are these price rises or inflation transitory or permanent?

The optimists argue the inflation spike ahead will last a short time until the world’s producers get over the restrictions of the virus. The pessimistic economists argue that this will push inflation up to a higher level for a long time. If these guess-merchants are right, interest rates will rise earlier and faster than is currently expected.

This will hit stock prices, super returns, investment, job creation and economic growth. It really is worthwhile to hope the inflation spike is transitory and that great economic growth without worrying price rises comes to the fore.

The ABC reports: “Restaurant and Catering Industry Association chief executive Wes Lambert said people could pay up to 20 per cent more than what they have in the past.”

The cost of supplies and wages is driving the price rises and it shows the impact of travel restrictions, border closures and the effect on production. Importers of food products from all over the world are paying more because small items, such as the wrapping paper that food manufacturers use is now more expensive!

And then there are the effects of the rising wage, with the Restaurant and Catering Industry Association boss estimating there are about 100,000 jobs currently vacant. This might not change until foreign workers or backpackers return and that might not happen until mid-2022.

States that are locked up longer than others should see price hikes larger than those that open up sooner and therefore can attract foreign workers ASAP.

The ABC referred to Tanya Hanouch of the restaurant Wolfe & Malone, who describes the pandemic effect on her operation. “Early [in] 2019 we were looking for kitchen hands and I would put an ad out … and we would get 20 to 30 emails come through in one day,” she said. 

Hanouch put the same ad out nearly two weeks ago and included a pay rise of 25% per hour, but not one person has applied for the job. “I think with our internationals gone, with people still a little bit dubious about getting out and working again, it’s quite a dire situation for a lot of us in hospitality looking for staff,” she said.

Bitcoin

And if this shortage and price problem extends deep into 2022, one group of people not fazed by it all will be those invested in bitcoin and other cryptocurrencies, with both bitcoin and ethereum hitting all-time highs this week, though the former was down $US2,000 or so overnight to $US66,685!

However, since June, its price is up over $US36,000! This is a crazy asset that has become more acceptable, especially following the likes of the CBA making it easier for their customers to buy, sell and store cryptocurrencies.

These new currencies will take time to be accepted and understood but they will become a part of our money furniture over time and regulation will eventually make it easier for us to accept them.

Until then, there are a lot of people making and losing money on cryptocurrencies, but those who got in early are now a lot richer than they were before they went long crypto and will easily ride out the Coronavirus-created inflation that’s on the rise.