Inflation ? 3% ? Don't make me laugh.

[Pessimistic]

How do they work it out

Everything is going up like stink - the rate has to be much nearer 10% per year if it was a true reflectoin of living costs

Any 'conomists care to enlighten me ?

PS this is even after the GST, which should only have affected one years figures.

 

[Darky]

Pretty sure low/dropping interest rates disguise inflation figures, as they are included.

 

[ACV]

Um, from what i can remember from my first economics, the CPI which measures inflation is made up of 80,000 plus items. So while yor costs may be going up more than 3% everyone elses are changing at different rates.

The GST is, more than likely, still having an effect, the feedback effects and post GST adjustments and corrections are still occuring.

Trust me, inflation is no where near 10%, if it was the succession of interest rate reductions that we saw would not have occured, as there was no real desperate need for them, Australia has proved to have one of the stronger economies in the wake of Sept 11, thus rate reductions occured without really effecting the economy.

Also, even if costs are going up it doesn't matter as long as you can afford at least as much as you could before. Most people (and this is not directed at you in any way, its simply a generalisation based on what most people i know do) look at how much goods cost them at the checkout but take no notice of what they have in their bank account. So until people compare those you can't really make judgements about the cost of living

 

[daddy_4_eyes]

They use a new way of calculating inflation which ignores short terms factors like interest rates, fuel prices, etc. It also does not include rural changes in inflation, and is calculated on a "basket" of good and services, which means not everything is taken into account.

Basically, its a system that can be very easily influenced by the government wishing to prove something.

 

[BomberBoy]

Its been less then a year since i completed year 12 economics, although I seem to have forgotten a lot. Basically, don't be fooled into the figure you see. The CPI is split into 8 categories, housing, transport, food, clothing, household equipment, tobacco and alcohol, health and personal care, recreation and education. They are all given weightings, thus a change in bread has more of an impact than a change in the price of chocolate.

A few of the limitations include that the survey is only taken in metropolitan areas (the same technique as unemployment which hides a lot of rural unemployment, [Very handy at election time]), you also have a lag of a couple of months from when the data is collected to when it is computed.

So basically dont be decieved - The fact that inflation was so high in the past year, was because of the impact of the GST, but now as predicted the rate has come down to the RBA's target of 2-3%. All is good!

 

[Briedis]

I was having this conversation with my dad last week and he (being an acoountant) started rattling off about interest rates etc.

Not being economically inclined at all, but 3% does seem a bit ridiculous considering the noticable increase in day to day living, especially in the past 5 years.