What is the true inflation?

One of the subject I studied in my young(er) days was Economics. I love macro economics, not micro. Anyhow I am getting a little rusty these days especially with our rapidly changing society/government......

In the last many years, the official inflation rate for Australia has been somehow low, very low actually, under or around 3%. However, my personal belief is the true inflation rate is much higher. Let me explain.

Ten years ago here in Qld, Council rates and water used to come in one bill. Then they split it and set-up QUU. It is not so bad at the start, and then QUU got more and more expensive.

The other one is insurance. Cost of insurance has gone up many times, be it building, car and what not.

Public transport and general transport is another. Ten years ago it cost next to nothing to catch a bus or citycat, and there were freebies when you travel within a certain timeframe etc. The same goes to the tolls...

I can go on and on but basically, I think the formula for inflation needs relook into. Granted, inflation only take into account of "necessities". But what are necessities these days?

Your thoughts?

 

Different for everyone.

For example, the official inflation figures allow for housing. Clearly there are differences between owning a house outright, owning but paying a mortgage and renting. If housing interest rates increase, it may feed into the offical inflation rate, but those who own their home outright are unaffected (unless they own IPS).
Marg

 

Other examples could also be the cost of cars and fuel has gone down but many items make up the CPI 'basket'.

 

Whatever the RBA want the rate to be... they can calculate CPI to fit their outcome by simply being selective in what goes in their basket of goods and what gets excluded.

 

The basket needs to be restocked.

 

Hard to quantity - from a purely objective angle, I'd say Australia feels bloody expensive these days, compared to, say, Europe.

Counter-argument to high inflation would be that a fair chunk of the CPI basket has index prices at multi-decade lows: new cars, women's clothing, small household electrical goods, audio/telecom equipment, computing etc.

Even food affordability is the best on record on the official figures, but it probably doesn't feel that way if you eat out. Overseas travel is another thing that is way cheaper than historical levels.

So you could see how the official CPI might be low.

But still every time I go to the UK, subsconsciously I'm thinking "cheaper".