People often complain that the prices of goods have gone up over the years.
Well they are not wrong; at least for the most recent quarter. In June, the consumer price index inflation jumped from 1.1% to 3.8%. A figure we have not seen since 2008. Should we be worried? Should we start stockpiling food and petrol? Elson Goh from EG Financial Services joined Mike to discuss what is inflation and what it means for our daily life.
What is Inflation?
The Australian Bureau of Statistic determines a basket of goods that represents the expenditure of the average Australian household. This includes Food, Alcohol, Rent, Motor Vehicles, Transport, Education and more. Consumer Price Index (CPI) measures the prices of these goods and services every quarter. Inflation is when the prices of the goods have increased.
The Good or Bad news
CPI is a number, but individual items fluctuate. For example, over the last 20 years the big price increases are education, medical, utilities and insurance. While on the other spectrum are items like audio and computing, games and toys and furniture. Your basket is probably very different to my basket.
What Can We Do?
- Stay claim. As inflation increases, the RBA will increase interest rates to ease the speed of increase.
- Wage inflation: which has been stagnant but is forecasted to increase to 2.5% by 2023
- Substitution: Be flexible and substitute expensive items for cheaper alternatives.
- Natural hedges are indexed government bonds, rents and dividends. If it is appropriate speak to an adviser.
- Avoid assets with no returns, such as gold and cryptocurrencies.
What item have you noticed the highest price increase? Let us know by texting or messaging us on socials. Listen to the full chat below!