- What is the current inflation rate in Australia?
- As of mid-2025, Australian CPI inflation is approximately 3–3.5% annually, down from a peak of 7.8% in December 2022. The RBA's target band is 2–3% over the medium term. The ABS publishes quarterly CPI data, which the RBA uses to guide interest rate decisions. The trimmed mean (which strips out volatile price changes) is a commonly used measure of underlying inflation and typically sits slightly below or above the headline CPI figure.
- What does the RBA's 2–3% inflation target mean for my savings?
- At 2.5% inflation — the midpoint of the RBA target — $100,000 in cash loses around $2,500 in real purchasing power each year. Over 10 years it buys only $78,100 worth of goods in today's money. This is why financial advisers consistently encourage Australians not to hold excessive cash long-term. The target also means that a savings account paying less than 2.5% actually loses real value. Current HISAs at 4.5–5.5% provide a positive real return at current inflation, but this is not guaranteed to persist.
- How does inflation affect superannuation?
- Your super fund's nominal return needs to exceed inflation to grow your real retirement wealth. Most Australian super funds publish a return target above CPI — for example, 'CPI + 3.5%' or 'CPI + 4%'. A balanced fund returning 7% in a 3% inflation environment is growing your real purchasing power at about 4% p.a. The longer your super compounds above inflation, the more comfortable your retirement. Conversely, if inflation is high and returns are low — a 'stagflationary' environment — super balances can stagnate in real terms.
- Should I worry about inflation if my HISA pays 5%?
- At current inflation of ~3–3.5%, a 5% HISA provides a real return of roughly 1.5–2% per year — your purchasing power is growing, but slowly. For short-term goals (emergency fund, house deposit within 2–3 years), a HISA is appropriate even with modest real returns. For long-term goals (retirement, 10+ years), relying solely on cash means accepting very slow real growth. The concern is not a loss — it is the opportunity cost of not investing in higher-returning assets.
- What assets protect against inflation in Australia?
- Equities (ASX shares and diversified ETFs) have historically been the strongest long-run inflation hedge, with real returns of ~6–7% p.a. over decades. Residential property in Australian capital cities has also outpaced inflation over long periods, though with much higher entry costs and lower liquidity. Inflation-linked bonds adjust their face value with CPI and guarantee a real return. Commodities (gold, oil) can hedge inflation in specific periods but are volatile. Cash and fixed-rate bonds tend to underperform during inflationary periods.
- How is Australian inflation measured?
- The Australian Bureau of Statistics (ABS) publishes the Consumer Price Index (CPI) quarterly. It tracks price changes across a representative basket of goods and services — housing, food, transport, healthcare, education, clothing, recreation. The basket is reweighted periodically to reflect spending patterns. The RBA also monitors the 'trimmed mean' CPI (excluding the top and bottom 15% of price changes) as a measure of underlying inflation that strips out volatile one-off movements.