For Australian Politicians the answer came via Cyclone Larry, which caused devastation to our main banana producing region of Northern Queensland on 20 March, 2006. About 90% of Australia’s crop was wiped out. Prices for bananas rapidly rose to about $13 per kilo (if in fact your supermarket or fruit seller actually continued to carry them!)

This rapid rise in the price of bananas quickly flowed into Consumer Price Index (CPI) calculations, and hence was used as the argument for inflationary pressures and interest rate rises. The simple fact that most people did not or could not buy bananas (even if they wanted to) did not stop the association of bananas with interest rate rises!

We now know that the next banana crop should start to appear
by Christmas 2006. At this time, we may have a massive oversupply of bananas due to the synchronisation or scheduling of the banana crop. This supply and demand imbalance will of course flow through to cheaper bananas (even at Coles and Woolies) and therefore a lower CPI in time.

Will this result in a lowering of interest rates? Not likely as the world Economy continues to grow strongly and the mere threat of inflation is more than the worlds central bankers consider desirable.

Although I look forward to the return of banana smoothies, banana bread and banana splits just around the corner, I fear it will be some time before I see lower interest rates. In the meantime I say let them eat bananas!