2021 has seen economists talk about inflation like kids falling on a favourite toy that has been hidden in a cupboard for yonks. Is inflation a temporary phenomena, caused by the fall-out of covid etc, or is the global economy entering a new phase?

Around the world, central bankers are worried about inflation. Meanwhile, Israel’s consumer price index (CPI) barely changed last month. Over the past 12 months, it has shifted a little over 2%, all very acceptable. And while interest rates are expected to rise eventually during 2022, the Bank of Israel is in no hurry to make the move.

Israel’s consumer economy is dependent on imports. The basic costs of foods and other raw materials have soared for manufacturers. Transport costs have more than doubled with the onset of corona. What has “saved” Israel from much of these price inflation?

The shekel is now officially one of the strangest currencies in the world. That situation will not change soon. This is providing consumers in the Holy Land with a security blanket. The shekel buys more. To give an indication of how strong the economy is, the GDP per person in Israel has nearly doubled since the onset of the credit crisis of 2008. Few others can boast such an achievement.

Where is the Achilles’ heel?

Yes, there are renewed concerns about unemployment. And I argue that much of the new wealth has been distributed amongst too few. However, what successive governments have consistently failed to resolve is the price of housing. It will rise by over 10% in 2021 alone.

Most people in Israel live in flats or apartments, due to the shortage of land. The cost of buying a home in Israel is rising faster than wages. More and more young couples are confined to the rental market, where prices are also moving upwards.

The source of the problem has been and remains supply. The government does not release enough land onto the market. Therefore, contractors are forced to pay relatively high sums to ‘enter the game’, which they simply pass on to their clients – new buyers.

And that suits the Ministry of Finance, at least in the short term, because of all the taxes that builders and purchasers have to make, determined by those original costs!. DUH!

As ever, we are promised sweeping changes to deal with this situation. We wait and see, There is no doubt that the current system is just unhealthy for society, whereby property is reserved for the “haves” only.