Is Inflation back ???

http://www.abs.gov.au/AUSSTATS/abs%40.n ... enDocument

Yes

If the economy remains strong, then the oligopolistic businesses that operate in this country will push through price rises. The new govt will keep the lid on wages so the genie won't get out of the bottle too far, but expect more Union actions.

Oil and petrol prices are the dampener, and demand may be less because of this.

So, Yes is the answer, but with caveats. If the US gets into trouble, inflation worries will be more self-correcting and the blunt use of interest rates will be diminished.

Medium term, who knows ... scenario keeps changing. balance of probabilities is that interest rates will be higher in a year. Reserve bank will do things to keep inflation in check; that's the bottom line.

That's my tuppence worth. cheers B

Gone

I tend to agree with the obvious "individual distortion" in CPI .
There are 2 factors that should be taken in account .
1. In recent years western countries have had their inflation disguised in the appreciation of property assets . A lot has been written on this phenonenon . There are latant reasons for this occurence and due to political correctedness I won't expand on it here .

The appreciation of property assets has created a feeling of exuberence among those that did not trade their only asset - their home , or/and real huge gains among those that traded their realestate assets for cash and equities .

In both cases , the result has been , a huge new leverage in exercising a higher standard of living , which was fostered further by the China sybnrome ( cheaper imports = stronger retail ) .

2. The second factor has been FREE INCOME .
It is definitely on the rise in western countries . In Oz we strenghened it further by increased affordability in the last 2 years where our A$ has gained 55% V the USD , a fact that made our USD imported goods much cheaper .

A unique OZZIE factor has been the FF DIVIDENDs
As most Australians have been investing in blue chip equities , this extra income , virtually free of tax for most , cannot be discounted .

Cheers eG

I’ve got the same impression, that low inflation is “boloney +â€

G'day all.

There is of course a conspiracy theory about low inflation. The government tends to choose inflation measures that underestimate the true figure, first because it keeps interest rates low, but more imoprtantly because pensions and many government payouts are indexed to the CPI. If inflation can be underestimated, then those unfortunate enough to be relying on the government to live will get relatively less and less money.

Cynical, me?

Bergholt.

I have tracked household expenses for over 15 years, with grocery and supermarket costs as one item I track. There was a huge hike in these costs in the year GST was introduced (no GST on food, but the costs skyrocketed all the same).

I keep average per fortnight figures from June to June, ie tax year. Number of people in household consistent throughout.

The increase each year over the previous year is as follows

<PRE>
To Jun 00 7.73% Pre GST
To Jun 01 16.83% Intro of GST
To Jun 02 0.74% Leveled out here
To Jun 03 11.36%
To Jun 04 12.95%
To Jun 05 8.73% Average to date


</PRE>


The final figure is average this year from June, it will probably be higher by Jun 05 as we have not yet bought Christmas dinner.

Maybe we eat better now than we did then, but I don't think this would account for more than a percent or two. In fact I used to include some items like pharmacy costs in the figures that I now account separately.

I don't believe 2-3% inflation either. They include things like computers and televisions that are coming down in price. We don't buy these every week.


Cheers

LJ

Gone

SatayKing,
Thank you for reply.

And if for some reason the other statistics pop up when it is more convenient for “themâ€

PPI for the Dec Q was 1.1% v 0.6% concensus expectation . RBA might change its view of neutral status going forward on interest rates ? ...cheers eG

Gone

Nice to see a thread with all my forum favorites contributing.

I'm in Bergholt's boat about governments choosing a statistical method most advantageous to them.

LJ, you are priceless! Running your own houshold costs index year on year. That is amazing! I think you could publish it.

I was of the understanding that rising oil (commodity) prices was the same macro-economic effect as rising interest rates, which neatly takes us back to Bergholt's conspiracy theory.

DefInItely yes INFLATION IS back with a vengeance, we just don't know it yet. Free market salaries are through the roof, and the costs of all this is being squirrelled away on the plastic cards.