Prices to rise as floodwaters fall

THE catastrophic floods in Queensland will end up costing consumers hundreds of dollars a year in higher prices for everything from food to insurance and even building and maintenance work.

The floods have ravaged farmland and many fresh fruit and vegetables may not be available in any supermarkets this winter.

"We might very well have to do what our parents did and only eat what is seasonally available in our local areas," said Caroline Schaefer, chair of the Agribusiness Association of Australia.

"Strawberries, melons, cucumbers, even mangoes, may not be available and those that are will obviously be very expensive because supplies will be so limited."

The price of sweet potatoes has already doubled, garlic and ginger are also up by 60 to 70 per cent, along with smaller increases for limes and tomatoes.

However, bigger rises are likely this winter because farmers cannot get back to plant seeds in the Lockyer Valley, a hugely productive food-producing area to the west of Brisbane.

"That will impact a lot of lines such as broccoli, carrots, cauliflower, beetroots -- many foods," said Jim Cooper, of Coles.

The floods have also affected production of eggs, chickens and milk, but the impact on prices is yet to be seen.

The cost of meat is also expected to rise, but there has been no assessment as yet on the number of livestock lost in the disaster.

Given the area flooded is as big as France and Germany combined, losses are expected to be huge, forcing up the price of beef in particular.

Insurance costs for all Australians, not just those affected by the floods, will also inevitably increase as companies try to cover their payouts.

"Suncorp has already said it is expecting to pay out around $130 million but I think insurers are going to get off more lightly than you might expect because so many people did not have cover, or were under-insured," said Prof Michael Sherris, from the Australian School of Business.

"I expect premiums to rise by around 10 per cent on home insurance policies but every other type of cover is likely to be hit as insurers try and recoup their losses, so even motor insurance premiums could see similar hikes."

Demand for furniture and electrical goods is also expected to soar as homeowners replace lost possessions.

Radio Rentals refused to comment on speculation it was preparing to raise prices to cash in on insurance claims.

However, shoppers around Australia may find shortages of many items as retailers prioritise stores in northern New South Wales and Queensland.

"We feel that it's the responsibility of large retailers like Ikea to ensure that we can provide products that will help people in flood-affected areas," said an Ikea spokesman.

"At the moment, our priority is to meet people's demands for basic items such as bedding and mattresses and we are working with our suppliers to make sure we can access as much stock as we need."

The store said it did not intend to increase prices as a result of the extra demand.

Experts expect that the property market may end up being squeezed up as the price of building new homes increases.

But one respite is likely to be mortgage rates.

The hit to the Australia's economy is expected to knock about 0.2 per cent off GDP, thanks largely to the impact on Queensland's coal mining industry -- equating to about $3 billion.

"That will mean the Reserve Bank is unlikely to raise rates in the near term," said Savanth Sebastian, of CommSec.

"But looking further out, the boost to the economy provided by the 'post-war-style' rebuilding effort will be a positive for the economy and could nudge inflation up by 0.15 to 0.2 per cent as people replace all of their goods and billions is spent on repairing infrastructure.

"Shortages of labour created by workers moving up to Queensland could also push wages up, so interest rate rises are likely later in the year."

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