Inflation is talked about a lot these days, and is a hotly debated topic – but what exactly is it, and how does it affect you and your money? 

If you watch the news, there’s no doubt you’ve seen segments on wage inflation, energy inflation, food inflation, fuel inflation… and not just in Australia. Essentially, inflation refers to the rising cost of living. 

But why does this matter? 

It’s an important topic to talk about because unless our incomes rise with inflation, our money won’t go as far, and many may find it difficult to buy items that they’re used to purchasing.

How high is inflation currently?

According to the most used measure of inflation in Australia, the Consumer Price Index (CPI), inflation increased by 0.8% in the July to September 2021 quarter and rose 3% over the 12 months to September 2021.

How is inflation controlled?

The Reserve Bank of Australia (RBA) has specific responsibility for ensuring low and stable inflation, full employment, and promoting the general welfare of the Australian people. 

So, what does rising inflation mean for you

• Your spending: The rising prices of goods and services will mean that unless your income rises too, you may find it difficult to afford the items you normally buy.
• Your savings: If your savings don’t grow at a rate at least equal to inflation your wealth will shrink. 
• Your loans: The RBA tends to use interest rates as its primary tool to control inflation. As inflation rises, the RBA will be more willing to raise interest rates – meaning mortgages, loans and credit cards can become more expensive. 
• Your investing: When inflation is rising, holding assets such as shares, property and bonds (or even foreign currency) can be more attractive than keeping cash in a bank account (because, as inflation rises, the value of cash tends to fall relative to other assets).

Safeguard your wealth against rising inflation, book a discovery session with Venture Wealth Management today.

Source: Financially Speaking Autumn Edition 2022