Time to read : 3 Minutes
The Reserve Bank of Australia's target inflation rate is 2-3% and we are way past that now. The Commonwealth Bank expects it will reach 7.75% by Christmas.
🛍️ There's a number of different factors at play here but in very simple household terms, the RBA wants us to spend less to get inflation under control.
📈 If the RBA doesn't think inflation is under control, it'll keep raising interest rates. Most banks think we'll see another 0.25% rise in the cash rate on Tuesday, although Westpac reckons it'll be as high as 0.5%.
💸 That could mean another $800 a month on a $500,000 25-year-mortgage, according to latest research.
So what is actually costing us more?
In a nutshell, the essentials and treats are all costing us a lot more than they were a year ago.
Let's break that down:
Our groceries are up by 9.2%, with our vegetables and fruit costing up a whopping 16.2% and other items are too – meat (7.3%), dairy products (12.1%) and even bread (10%) is more expensive.
Rents are also increasing, with Sydney showing a 4.8% increase, as vacancy rates fall and prices increase. Across Australia the increase is sitting at 4% across all other capitals except Melbourne (2.6%)
Non-discretionary spending has hit a new high of 8.4% – meaning we are still big ticket items like shiny big TVs.
Urban transport is also more expensive, at 6.6% – so even our trips into work are hurting our budgets.
Electricity costs were up in almost all centres, with Sydney coming in as the unlucky winner with a 25% increase. Perth's $400 Household Electricity Credit buffered them from the rising cost of power.
Construction costs continue to climb, now sitting at 20.7%, which explains why so many companies are currently going bust.
What isn't costing much us (yet)
The reality is there isn't much that is affordable right now, but there are still some things you can buy at a good price.
Fuel is still being buffered by these September figures, but with excise now lifted, December figures are likely to be very different.
Education costs are currently not affected sitting at 0% year on year.
Perth is the only winner in this report with their city being the only one that recorded a minus inflation of -.50%
There are some clothing bargains about with prices softening by 0.20% – not much we'll grant you but every cent counts right now.
Health costs remained fairly steady at 1.8% – allowing us to at least maintain our check-ups.
Alcohol is also staying fairly low, chiming in at 1.4% – so we'll still be able to have a couple over Christmas.
The bottom line is...
Inflation is here, and it's not going anywhere any time soon.
For the majority of Australian's it means we are going to have to have to pay attention to our costs and make some hard choices.
😔 It also doesn't bode well for the RBA announcement next Tuesday either with all signs pointing to another increase.
