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Most households can expect to fork out R1 000 more a month

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Old 04-08-2006, 06:43 PM   #1
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Most households can expect to fork out R1 000 more a month

Most households can expect to fork out R1 000 more a month
August 04, 2006 Edition 2

Yvonne Grimbeek

Consumers, already battered by rising petrol and house prices, will have to tighten their belts even more before the end of the year.

When the Reserve Bank met in Pretoria yesterday, Governor Tito Mboweni announced an increase in the interest rate of 0.5%, raising the prime lending rate to 11.5%.

On June 8, he announced a 0.5% increase in the interest rate, which meant an almost immediate increase in bond rates.

The latest increase will add R374 to the monthly bill of home owners paying off a house priced at R550 000. However, most households will probably end up paying more than the median increase.

On Wednesday, the petrol price increased to R6.80 a litre at the coast. This was the seventh increase this year.

Effectively, this means that the driver of a car with a 50-litre tank is paying R77 more to fill the tank than on January 1.

For most commuters, the latest increase could see their fuel bills increase by almost R400 a month.

And there is more bad news.

The increases mean most households could be forking out at least R1 000 a month extra, because the increase in the fuel price and the bond rate has an almost immediate knock-on effect on food and consumer goods. Minerals and Energy Minister Buyelwa Sonjica said it was "worrying" that everything to do with transport would be affected by the fuel price hike. Fuel hikes were inflationary, impacting on all spheres of life - something which would be most acutely felt by the poorest of the poor.

"The domino effect on the rest of the economy is real, but also difficult to be mitigated against," she said.

"South Africa is a consumer of imported crude oil and does not have control over the pricing of fuel," said Sonjica.

The government was keen on a speedy resolution to the situation in the Middle East, realising it was impacting on overall world fuel prices. It was co-operating with other governments in search of alternative fuels to ensure the security of supply for the country, Sonjica said. The bad news is that consumers can expect at least one more increase in the next few months. The Automobile Association's Gary Ronald said the worst-case scenario would see the price go up to more than R7 a litre before December.

The Chief Economist of the Standard Bank, Goolam Ballim, believes the increase will normalise consumer spending but will not lead to major problems in the average South African household.
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