If there is anything that makes people angry, it is inflation.

People hate is so much.

And when the United States reaches 6.8% inflation, it seems like the end of the world.

But is it really Boogeyman that everyone is thinking?

Here’s the truth about inflation…. Inflation means `things` are becoming more expensive.

Let’s dig in a little bit more about inflation and see what’s going on and if it really sucks.

First, how do we compute inflation? Inflation is calculated as a typical spend for an Australian household.

What the RBA does is check the prices of basket of goods for grocery items that the average family might buy.

Bread, milk, pasta, schnapps, and the like.

Next, add fuel, medical, education, clothing, telephone, vacation, and housing costs.

And they come up an amount with how much an average family spends.

Next, calculate how much it has changed since the same period last year. And they compute inflation.

Depending on where you spend your money, this might be realistic for you. But it may also not.

Either way, it’s just a general figure to give an overall view of how much stuff costs.

So does it suck?

Inflation’s got a bad rap because it means you need to spend more money on the same goods.

But it’s actually normal in the economy and has been going on forever.

You only need to see old newspaper ads with cans of tomatoes for 12 cents a can, and new cars for $3,000 to realise this.

Therefore, it cannot actually be changed nor be stopped.

It should also be remembered that without money, people cannot pay more for goods.

And now with low interest rates being offered and all the stimulus around, people have more money.

Inflation usually means there’s been an increase in wages, and that’s what we’re seeing.

Inflation in Australia is 2.5% and wage growth is at 2.2%.

You see, they match pretty well, right? With the addition of low interest rates, I think we will see inflation at high interest rates for at least the next few years. And all this point is to show you that inflation is not bad. In fact, it means that you have a lot of money, so in most cases it is a good economic indicator.

Hope that makes sense.

P.S. You can work with us and we can assess your investment needs. You can book a free consultation with our Investment specialist HERE.