Suddenly, it seems, a major river system is “running on empty”. Without prolonged steady rain, irrigation will be stopped, farmers ruined and there will be food price inflation in the towns and cities.

The PM and his water minister have taken control, but unless the water gods cooperate, whatever they do will be no more than a drop in the river. And the water gods have only six weeks…

The PM says he is unconvinced of the link between climate change and the drought. But the true situation may never be known. Like the drought, we may discover of climate change itself that in retrospect all the signs were there, but largely ignored. The prudent course is to act to reduce (not just slow the growth) of greenhouse gas emissions.

The Prime Minister’s announcement brought suggestions from Irrigation Association of Australia chief executive officer Jolyon Burnett that we will see another hike in food prices similar to the Cyclone Larry-banana inflation that occurred during the June Quarter of last year.

This brings to mind another difficult question that the Government may have to face – if such a food shortage occurs, will more imports be allowed to make up for the supply shortage?

Many charged that the refusal to import bananas, which were in abundance in the Philippines for example, was blatant economic protectionism rather than protection from pestilence. Will we see $15 peaches, apples, oranges, apricots?

The fear of skyrocketing food prices will of course have city-slickers praying for rain, but we’ve got to pray pretty loudly to compare to the army of farmers who have been praying for nigh on three years.

According to the latest Melbourne Institute survey on inflationary expectations, more people are expecting prices to rise in the next 12 months. MI found that 77.8% of respondents said they expect prices to rise over the next year, up from 76.9% last month. Now, only 18.3% of respondents say they think the RBA will be able to contain inflation between 2 and 3%, compared with 21% in March. The public it seems are about as confident as Henry.

In international news, China reported overnight that their overheating economy continues to sizzle. In the First Quarter, Chinese economic growth ran at a higher-than-expected 11.1%, but the real kicker was inflation, which increased at the fastest pace in two years.

This has raised suggestions that the Chinese Government will take further measures to halt such growth. As Forbes magazine said this morning: “They say when China sneezes, the world gets pneumonia. Now the same seems to be true even when the Asian economy gets a clean bill of health.”

Read more at Henry Thornton.