On Wednesday, the Australian Bureau of Statistics (ABS) will likely confirm what households across the country already know: the cost of living is rising.
Inflation is the buzzword here, and we expect that term to dominate the headlines for at least the next day or two, especially since it’s likely to hit a 32-year high on Wednesday.
Economists are tipping the ABS figures to show another rise, from 5.1% to an expected level of around 6.3%.
With that in mind, here’s what you should know about inflation, including how it affects you and your household budget.
Australia’s cost of living crisis is set to deepen, with Treasurer Jim Chalmers warning that inflation will be significantly higher than expected, reaching 7% by the end of the year. (AP)
Inflation measures the prices of goods and services that households buy.
In Australia, this is also known as the Consumer Price Index, or CPI.
OK, tell me more about the CPI
The CPI measures quarterly changes in the price of a “basket” of goods and services that make up a large proportion of metropolitan household spending.
Many items, too many to list here.
But the basket covers a wide range of goods and services in 11 categories: food and non-alcoholic beverages, alcohol and tobacco, clothing and footwear, housing, furniture, home equipment and services, health, transport, communication, recreation and culture , education, insurance and financial services.
The ‘basket’ essentially tries to replicate the actual spending of ordinary Australian households.
So what has happened to the CPI lately?
In March, first-quarter data showed the CPI rose to 5.1%, up from 3.5% in the previous quarter.
That jump, which was higher than expected, was largely driven by higher fuel prices and higher construction costs.
And what can we expect on Wednesday?
The word is 6.3 percent, the highest CPI in more than three decades.
Any predictions beyond that?
The Reserve Bank warns that inflation is likely to reach 7% before the end of the year.
So what does all this mean?
With each increase in inflation, your purchasing power goes down, because you generally pay more for the items you buy regularly.
Are there elements more affected than others?
There are no hard and fast rules here.
But looking at the March ABS figures, there are certainly some categories in this CPI basket that have been more susceptible to larger rises.
Transport was a big driver, up 13.7% year-on-year.
Housing, food, home equipment and furniture also saw notable gains.
And what about businesses, how are they affected?
Not great for them either.
Companies will face an increase in the cost of raw materials. In addition, workers are likely to demand higher wages to cope with the high cost of living.
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