Do you understand inflation? The Wealth Through Property Series

We hope you are enjoying the daily insights from Daimien’s book, Wealth Through Property.

The Australian Bureau of Statistics is a government department whose job is to collect data, and record the progress of that data, and the shifting nature of those measurables. One thing that they record is inflation. They deduce that by tracking all the staples such as bread, milk, petrol, house prices and the like. They then use a magic formula that produces an average percentage inflation of all of those things and they report that figure.

The government then makes decisions about certain policies based on that inflation figure. One example is the reserve bank interest rate and how it will be set. Other examples are the setting of pensions and the increase of government pensions to cater for the ongoing rising costs caused by inflation.

Take a look at how inflation has fluctuated over the last 60 years:

Figure: Inflation over the years (1960-2020)

Stay tuned for more daily insights from Daimien in Wealth Through Property.

~Integrity Team
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