DON'T BLAME THE BANANAS

Sydney, Aug 4 NZPA - For a while bananas were getting the blame.

Bananas and oil prices. Australian government statistics released last week revealed annual inflation had climbed a percentage point to 4 percent in the three months ended June due largely to the high cost of oil and a 250 percent jump in the price of bananas.

That jump was because Cyclone Larry flattened the Queensland banana crop in March.

Bananas are on the Australian Bureau of Statistics' basket of goods, the notional typical week's shopping by which it measures inflation.

Western Australian banana grower Kevin Leahy seethed.

"It's absolute bulls..t," he told the West Australian newspaper. "What about grapes or strawberries or peaches? The prices of those jump all over the place."

Bananas didn't deserve the blame, because unlike fuel they were not indispensable, said Mr Leahy, who grows his crop at Carnarvon, 900km north of Perth.

"You don't have the opportunity to say, `Well, fuel's too high, I'm not going buy it,' but people have been doing that with bananas. They've swapped to other fruit."

Carnarvon is reaping the benefit of Queensland's loss, with a standard 13 kilogram box that fetched $A15-$A20 ($NZ18.66-$NZ24.88) wholesale before Larry struck now selling for $A150, though the good times won't last, according to Mr Leahy.

On the back of the inflation spike, the Reserve Bank lifted interest rates by 0.25 percent to 6 percent, though bananas were this time cleared of blame, saying it recognised it was "necessary to abstract from temporary influences in forming its policy assessments".

Or in the words of Prime Minister John Howard to the ABC: "Look, on bananas, I think we all accept that bananas are in one quarter and out the next. Bananas were a cause of the inflation rise last week, but the bank, quite rightly, looked through that and said, `Well, that's a one-off factor and it will disappear in the next quarter'."

Mr Howard, who announced earlier this week he would lead the Liberals into next year's general election, seeking his fifth term as prime minister, argued that petrol prices were "the biggest problem Australians have with the economy".

"It worries me more than anything else," he told reporters. He also took the novel approach of asking anyone who had a "magical solution" to petrol prices to get in touch with him.

"Will you ring The Lodge and I'll spend an hour, all ears, listening to them."

Most commentators saw his remarks on petrol prices as a smokescreen to avoid a public backlash over his promise before the 2004 election "to keep interest rates low".

But he did admit there would be pain over mortgage rate rises.

"I don't like it, I'm sorry about it. Nobody likes interest rates going up but I don't believe that the Reserve Bank had any responsible alternative other than to take that decision."

However, he was quick to clear himself of any blame for the rise.

"I don't owe the Australian public anything more than what I've committed to the Australian people -- and that is to manage the economy well."

But there have been seven successive rate rises in four years, including three in the past 18 months, and many economists are saying another increase this year is likely.

The pain is most acute in Sydney where the level of loan debts is higher than the rest of the country.

The Housing Industry Association says the 0.25 percent rise will add $A62.52 a month to the repayments on a $A400,000 mortgage.

Mr Howard's opponents have jumped at the opportunity to attack him over his stewardship on the economy.

Labour leader Kim Beazley accused him of a "massive breach of trust", while the shadow treasurer, Wayne Swan, said Mr Howard's "fingerprints are all over this interest rate rise" because he had failed to deal with the factors that drove inflation.

"If interest rates were going down today, John Howard would be out there claiming credit," Mr Swan told reporters.

It all paves the way for a tight election next year.

Back in Western Australia, Kevin Leahy, who heads Carnarvon's Sweeter Banana Co-operative, has other worries, as he knows his current banana boom is a temporary one.

He believes Queensland bananas will be back in shops by October, and by March prices could plummet below $A15 a box, the point about which Carnarvon growers break even.

"The growers think I'm joking but I've told them all to take a holiday in February and March and just drop their fruit on the ground because you're not going to be able to sell it."