Why everything is so expensive

$30 for a salad? Seems a bit steep.

$30 for a salad? Seems a bit steep.

The humble, iceberg-based salad.

A statement of any family BBQ, or a dinner party you’ve struggled to throw together post-work. And now, the victim of Australia’s soaring cost of living (or, inflation). 

Analysis of Woolworths prices from December last year show the cost of a standard salad has jumped from $21.60 to $29.45. 

That’s a 25% increase. See for yourself: 

What is inflation?

Inflation measures how much more expensive goods and services have risen over a certain period of time.

Here are the costs, and how they've jumped over the past year: 

• The price of meat has been jacked up by 6%
• Bread prices have jumped up by 3%
• Dairy costs have risen by 4%
• Fruit and vegetable prices are up almost 7%
• Apartment rents have gone up by about $30 or 6.4% to a median of $500
• Petrol prices jumped by 35%

Soaring prices can be put down to disrupted supply chains, Covid economic downfalls and subsequent recoveries, floods, and the war in Ukraine.

This is all on top of people around the country finally spending their savings they amassed throughout two years of lockdowns. 

When people spend lots of money, the prices of goods and services go up because there’s so much demand.

And what does the interest rate have to do with it?

On Tuesday the Reserve Bank of Australia bumped the interest rate up from 0.85% to 1.35%, in an attempt to flatten rising inflation.

It means Australia's mortgages will get even expensive - households with a $750,000 loan will be paying up to $500 more a month for their mortgage compared to March, when the interest rate was 0.1%.

If people have to pay more for their mortgages, then they’re less likely to spend big elsewhere. Demand for goods goes down, and so do their prices.