Inflation hits 32-year high of 7.3%: What this means for you
Here's how a high inflation rate impacts your mortgage, cash in the bank and day-to-day expenses.
Australia's inflation rate has climbed yet again. The new inflation rate of 7.3%, up from the previous rate of 6.1%, is the highest Australia has seen since 1990.
Some of the biggest drivers of this are a surge in grocery prices, housing costs and transport (we've all noticed how expensive petrol prices have been).
What the 7.3% inflation rate means for you
A high inflation rate has a few implications for your money.
Everyday items, especially groceries, are more expensive
You've probably already noticed how your grocery shop has been more expensive over the past few months.
While the cost of goods and services has gone up by 7.3% on average over the past year, the cost of food and beverages has gone up 9%.
Unfortunately, an increasing inflation rate means this is likely to continue for a while.
We'll likely see more increases to the cash rate
The Reserve Bank of Australia (RBA) has increased the official cash rate 6 times this year as it tries to reduce spending and slow down inflation.
However, with inflation still climbing, we'll likely see further hikes to the cash rate.
This means your mortgage will continue to go up too. And if you don't have a mortgage, rent prices will rise as landlords try to pass on some of the increased costs.
Your money is worth a bit less
An inflation rate of 7.3% means that for every $100 you spent this time last year, you'd need to now spend $107.30 for the same items (on average).
In effect, your cash is worth less now compared to this time last year.
However, there is one positive to rising rates. Interest rates on savings accounts and term deposits have been going up a lot this year, so you can now earn a much better interest rate on your savings than you could 12 months ago.
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, if you haven't already. With rates rising, refinancing your home loan could save you tens of thousands of dollars.
- Compare your bills. Energy prices have risen a lot this year. 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, some freelance work or rent out your car, spare room or garage.
- Get a better return on your cash. Rates on savings accounts have risen a lot over the past 6 months. You can now earn above 4% with a number of accounts.
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.
