What does a drought in Central America have to do with Australia's cost of living? Quite a lot, if the drought affects the Panama Canal.
warned about the impact of global warming and the likelihood that disruptions in supply chains would lead to increased food prices.You may wonder how something as far away as the Panama Canal can affect Australian retail costs. A good question. The answer is that today's supply chains are global and interconnected.by the Productivity Commission on supply chains noted they are complex.
That is because buyers and sellers can shift goods depending on market conditions. Buyers move things to where the prices are cheaper, sellers to where the prices are higher. If a firm sells in one market, that affects a seller in the next market.Each firm's shortages or surpluses have an impact on prices. They in turn trade with other markets in different regions. Knock on effects spread across the globe.
Let's consider how delays at the Panama Canal affect these. If a spare part for a manufacturer in the US or Japan is delayed by the shipping queue, the buyer will go to another supplier to avoid holding up their production line. Generally, this means paying a higher price.Sometimes the costs of a disruption filter into markets slowly, especially for items that are not traded very often and have few substitutes.
Given extreme weather is becoming more common, and affecting our cost of living, what should be our response?Most important of course is to reduce our contribution to global heating. If governments do not meet their targets for emissions reduction the problems and costs will multiply.
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