Inflation calculator: Discover personal inflation rate, money saving hacks

Experts have developed a personal inflation calculator that shows how you can save money. Try it here and see where you’ll save.

Australia’s consumer price index may have officially risen 6.1 per cent in the year to June – the fastest increase in more than two decades – but cost of living pressures are not one-size-fits-all.

Recent new homebuyers could be facing a personal inflation rate around 11 per cent, while car-free renters are closer to 3 per cent.

To help people identify where they stand, News Corp has developed a personal inflation calculator that also shows the levers they can pull to reduce their individual rate.

“Inflation might be higher for some people but lower for others, and that’s the whole benefit of this tool,” independent economist and computational finance expert Dr Marcus Smith, who consulted on the calculator, said.

“You can tailor it to your own circumstances and consumption patterns.”

The personal inflation calculator is based on household expenditure data provided by the Australian Bureau of Statistics.

It works by weighting the value of a typical basket of goods so that specific items make up different portions of the basket for different people.

The calculator is heavily influenced by two of the biggest expenses currently affecting Australia’s cost of living: fuel and housing.

A person who has bought a new property in the last 12 months and drives is going to have a much higher inflation rate than someone who has not.

TRY THE INFLATION CALCULATOR BELOW:

One interesting aspect of the calculator is the impact of being a smoker versus a non-smoker.

Cigarette and tobacco prices only increased 1.5 per cent over the last 12 months, meaning as a category it lowers the overall personal inflation rate.

The tool is an indicator only and does not take into account all individual circumstances.

Dr Smith said CPI was used by policy makers to measure the cost of living and by individuals to compare cost of living with changes in their wages, but CPI did not tell the whole story of inflation.

One disadvantage of relying on the headline CPI figure is that it does not include data from regional areas, where the cost of living is typically higher.

“The lower the number of businesses, the lower the competition, which will ultimately lead to relatively higher prices,” Dr Smith said.

CPI also does not take into account people’s ability to substitute goods and services for less expensive options.

“For example, bananas went up in price when we had cyclones so people just stopped buying them and substituted for another fruit,” Dr Smith said.

“People might take public transport instead of using fuel.”

TRY OUR HOUSEHOLD BUDGET CALCULATOR:

Another major disadvantage of the CPI measure is that it excludes costs relating to the purchase of established dwellings and investments such as shares.

There is a component in the CPI that captures the cost of adding to the housing stock – newly built dwellings and major renovations – but this excludes the value of the land, according to The Reserve Bank of Australia.

“The effect of elevated CPI inflation needs to be put in context of the ability of individual mortgage holders to afford or absorb increases in mortgage payments within their household budgets due to rising interest rates,” Dr Smith said.

“The CPI measure does not sufficiently capture associated wealth or income effects that may impact on (this).”

WHAT DOES MY INFLATION RATE MEAN?

10%+

These scores are reflective of Australians who own property or have a mortgage. The calculator does not measure house prices but simply takes into account higher costs related to new property ownership over the last 12 months. Higher prices for fuel and discretionary items also influence a higher personal inflation rate.

Households with a 10% read and above within this calculator are the working families of the economy who drive cars and typically have dependants.

Tips: Use public transport, consider larger bulk shopping and either look to refinance or pay-off mortgage further.

5-10%

Family types are typically more frugal and either rent, own their home outright or whose living circumstance is not heavily influenced by having somewhere to live. Fuel and transport impacts heavily within this category.

Tips: Use public transport, bundle utility bills.

5
Accommodation is either not a consideration or the family is one which owns property outright. Food and energy weigh more heavily within an inflation rate below 5%.

3
This is a household which is frugal, doesn’t go out and has little in the way of cost impacting their purchasing power the same way a person relying on a vehicle to work and live does.

Originally published as Inflation calculator: Discover personal inflation rate, money saving hacks