Does it feel like everything is more expensive these days, including groceries and basic household necessities?
That’s because everything is more expensive.
New research from the Australian Bureau of Statistics (ABS) found that, between 2012 and 2019, the cost of “essential” goods rose faster than inflation.
Essential goods are considered “non-discretionary” because we have no choice but to buy them. Think food, healthcare, utilities, household goods, etc. ABS data showed that cumulative non-discretionary inflation was 14.8% between 2012 and 2019, while the official inflation rate was 14%.
Meanwhile, “discretionary” inflation (think holidays, alcohol, restaurants, etc.) increased 12.9% over the same period.
As an FYI: The Reserve Bank of Australia usually targets inflation at 2-3% annually.
The research clearly shows that life’s everyday essentials have become more expensive over time. The picture is even more bleak when you compare these rising expenses with annual wage growth.
This chart, courtesy of ABS, tells you everything you need to know:
If your salary adjustments are tied to the official inflation rate, your income is barely keeping up with the cost of essentials, let alone property, education or luxury goods.
ABS data showed that non-discretionary items even outpaced wage growth in some years. For example, in 2017, wages increased by 1.9% compared with 2.4% for non-discretionary items.
Of course, these trends don’t account for the coronavirus shock. It could take many years for the true impact of COVID-19 is fully quantified.
Until then, keep a close eye on your grocery bill. Consider downloading micro-investing apps like Raiz that can help you put away small chunks of change towards financial assets every time you spend money at the store. Investing spare change may not seem like much, but it adds up over time.