Households face a series of price hikes, starting with steeper petrol prices next month and a 25.8 percent electricity tariff increase in July.
The size of the petrol rise will be announced on Friday.
Econometrix chief economist Tony Twine predicts an increase of about 45c a litre on April 6, made up of an 18c increase in levies and a possible 27c underrecovery.
The move would push a litre of 95 octane unleaded petrol in Gauteng to R9.87 from a low of R8.07 in September last year. Fuel prices are adjusted monthly to bring them in line with the cost of a basket of imported fuel products.
In recent months, the petrol price has soared along with international oil prices.
Benchmark Brent crude oil has been on a sharply rising trend since late last August when it troughed at $76.30 a barrel. It breached $100 late in January as unrest erupted in north Africa, and futures traded yesterday at $114.94.
News this week from Libya brought little hope of relief.
Brait economist Colen Garrow said fuel prices had already risen for six months in a row – by almost 17 percent cumulatively. And in the light of high oil prices, he warned “an underrecovery of as much as R1.20 a litre may have to be recouped from motorists over the next few months”.
But that is only one item on the household budget that will rise. Last year the National Electricity Regulator of SA gave electricity generator Eskom the go-ahead to increase its tariffs by 24.8 percent last year, 25.8 percent this year and 25.9 percent next year.
Garrow said this year’s hike would become effective in July.
He predicted increases in property taxes of 6 percent to 8 percent as well. In the case of both electricity tariffs and property taxes, the increases applied to households vary depending on the municipalities in which they live.
Garrow was critical of the Reserve Bank’s monetary policy committee for not signalling a hike in the bank’s repo rate last Thursday. While he saw the decision to keep the rate on hold at 5.5 percent as appropriate, he said that the message could have been more hawkish.
Garrow pointed to the danger that a price shock could see higher inflation expectations becoming entrenched.
“Prices are always responsive on the upside but sticky on the down side.”
And he called for firm action to prevent the second round effects of high petrol prices working their way through the economy.
Garrow added that market interest rates were already pricing in a full percentage point increase in the repo rate by the end of the year. This would add R652 on a R1 million monthly mortgage repayment.
However, Econometrix Treasury Management managing director George Glynos has a different take on inflation.
He believes the impact will be delayed because the money in the system has not been growing strongly and credit growth has been restrained.
Glynos forecasts a rate rise only next year. - Business Report