Inflation climbs even higher to 6.1%: What this means for your money
Here's what rising inflation means for your mortgage, money in the bank and everyday expenses.
We've already seen the cost of living go up in recent months and now it's about to get even worse. Australia's inflation rate has risen yet again to 6.1%, up from 5.1% in the March quarter. This is the highest inflation rate we've seen for 3 decades.
Unfortunately for us, rising inflation means everything will keep getting more expensive. Here's what the latest inflation rate means for your money and what you can do about it.
Everyday items are going to get more expensive, again
We can expect to see the cost of everyday items continue to climb. Inflation measures how much the cost of living has risen. The latest figures show the cost of living has risen by 6.1% compared to this time last year.
So far, we've seen big price increases in grocery items, particularly fresh produce such as vegetables, meat and dairy products, as well as petrol prices. We can expect this to continue (and likely get a bit worse) over the coming months.
Your money in the bank is worth less
Because the cost of living is more expensive, it means your buying power has gone down. Your money in the bank can now buy less than it could this time last year.
An inflation of 6.1% means that on average, you need $106.10 today to buy what $100 bought you 12 months ago.
If your income has remained the same and you haven't got an increase, it effectively means you've had a pay cut as your money is worth less. With Australian wage growth sitting at just 2–3%, on average, our incomes aren't keeping up with inflation.
Your bills, rent and mortgage will likely go up
We've already seen the Reserve Bank of Australia (RBA) lift the cash rate a few times this year. With inflation climbing, we can expect to see more increases in the cash rate. This means mortgage rates will go up even more than they already have and people will see their monthly repayments increase further.
This will likely create a trickle-down effect to rent prices too. As landlords deal with their repayments increasing, some of this cost will be passed onto tenants in the form of higher rent.
Household bills will also likely continue to climb, with the most significant being electricity prices.
Tips to keep up with rising inflation
Here are a few things you can do to keep up with the rising cost of living.
- Refinance your mortgage. With rates rising, refinancing your home loan could save you tens of thousands of dollars.
- Compare your bills. Energy prices have risen dramatically already. Compare electricity plans to see how much you could save.
- Increase your income. If you can't get a pay rise, consider a side hustle or rent out your car, spare room or garage.
- Get a better return on your cash. Open a high interest savings account, or invest in an exchange-traded fund (ETF).
The first step towards keeping up with the rising cost of living is to create a budget, reduce your spending and look for ways to save.
