Author: Mr DDU.
It’s been 52 weeks since we started our inflation study, so now is a perfect opportunity to do an update post.
We decided to run the inflation study as a bit of fun but mainly to show how important it is for us to invest in assets that will pay increasing money over time, otherwise inflation will eat our lifestyle.
The things we decided to track were as follows:
- The Government’s suggested annual living costs for a comfortable couple
- (Mean) Average Australian House Price
- Average Australian House Rent per Week
- Water price per kilolitre
- Aldi food basics basket (1 loaf of quality white bread, 700g carton of 12 free range eggs, 1kg of Australian ‘tasty’ cheese, 1kg of free range chicken breasts, 1kg of Pink Lady apples, 2kg washed potatoes, 375g jar of Nutella, 500g of regular salted butter, 455g jar of Vegemite and 12 rolls of 2 ply toilet paper)
- A2 Milk 2L (priced from Coles Supermarket)
- Current Year Toyota Corolla Ascent Hatchback Silver (from Toyota Australia Website), automatic transmission no add-ons
- Newest iPhone (from Apple Australia Website) 4.7-inch screen for 16GB, 64GB and 128GB phones
- Direct Return Flight with Qantas from Sydney to London (from Qantas website) booked for 3 months from today, returning 2 weeks later.
- 4kg of Royal Canin Indoor Dry Cat Food (from Petbarn website)
We chose all the above items because they are things that we would very likely be affected by in early retirement. We may not buy an iPhone or Qantas flight but we would be getting something similar so it’s good to compare.
So, after a year, these are the changes in the prices:
That leaves us with a negative 3.8% inflation, AKA deflation, on the items that we have tracked over the year.
We couldn’t get the right comparative data in 2017 for the house rent and water, so we used a different provider/starting number in 2016.
A few interesting things stick out from the above table. The average Australian house price marched higher over a 12 month period and most household items increased by a reasonable figure of 2% to 3%.
The Australian dollar a year ago bought US 74.7c and now it buys about US 80c. That would be our guess as to why the Toyota Corolla and London flight have decreased in price by a large percentage. The interesting thing is that a new iPhone (the 7) has been released but it’s the same prices (in Aussie dollars) as the old phone. But with the strengthening of the dollar, its price has actually increased by around 7% in US dollar terms.
It’s interesting that most household things have increased in price by 2%+ yet the Govt suggested income has only gone up by 1.2%. One would guess that takes into account some things that have gotten cheaper, like flights.
This first update shows that it’s important to have assets that at least grow income at the speed of inflation, which isn’t much at the moment. The thing that is most apparent is that house prices grew even more and that prospective first home buyers need to get saving up their deposit hard and fast if they want to catch up with the rising house prices.
Did any of the price changes surprise you? Have you noticed anything in particular go up or down a lot in price over the last year?