Inflation in Australia
Inflation Investigation
Economists say that inflation refers to as a continual rise in the general level of prices. An increase in the general level of prices for goods and services will cause a decrease in the purchasing power of the currency. While inflation is defined as an increase in the level of prices, not all of these prices necessarily change by the same proportion or even in the same direction. FIND AN EXAMPLE Because of this, inflation affects the distribution of real income and wealth among individuals and households.
Inflation can cause many significant economic effects. For example, it can have an impact on the distribution of national income and wealth. The relative rates of inflation in Australia and inflation rates overseas can influence international competitiveness. A low and stable rate of inflation is desired for the welfare of the economy and for individual benefit.
Measuring Inflation
The most common way to measure inflation is to calculate the rate of change of the Consumer Price Index (CPI). The CPI summarises the overall change in the prices of a large number of goods and services. The CPI is based on a sample of a range of goods and services arranged in the following eleven groups:
This sample of goods is referred to as the regimen (the different groups of goods and services included in the sample). In Australia, the CPI is calculated by the Australian Bureau of Statistics (ABS) and is compiled on a quarterly basis by collecting approximately 100,000 price quotations. The ABS attaches a weight to each item in the CPI regimen in order to reflect its importance to the ‘average’ household. For example the average household would consider a 10% rise in the price of fuel more important than a 10% rise in the price of cellophane. Reviews of the importance of the eleven groups are reviewed every five years in order to keep an accurate reflection on the household’s buying patterns and what is considered important. For example,
Economists say that inflation refers to as a continual rise in the general level of prices. An increase in the general level of prices for goods and services will cause a decrease in the purchasing power of the currency. While inflation is defined as an increase in the level of prices, not all of these prices necessarily change by the same proportion or even in the same direction. FIND AN EXAMPLE Because of this, inflation affects the distribution of real income and wealth among individuals and households.
Inflation can cause many significant economic effects. For example, it can have an impact on the distribution of national income and wealth. The relative rates of inflation in Australia and inflation rates overseas can influence international competitiveness. A low and stable rate of inflation is desired for the welfare of the economy and for individual benefit.
Measuring Inflation
The most common way to measure inflation is to calculate the rate of change of the Consumer Price Index (CPI). The CPI summarises the overall change in the prices of a large number of goods and services. The CPI is based on a sample of a range of goods and services arranged in the following eleven groups:
This sample of goods is referred to as the regimen (the different groups of goods and services included in the sample). In Australia, the CPI is calculated by the Australian Bureau of Statistics (ABS) and is compiled on a quarterly basis by collecting approximately 100,000 price quotations. The ABS attaches a weight to each item in the CPI regimen in order to reflect its importance to the ‘average’ household. For example the average household would consider a 10% rise in the price of fuel more important than a 10% rise in the price of cellophane. Reviews of the importance of the eleven groups are reviewed every five years in order to keep an accurate reflection on the household’s buying patterns and what is considered important. For example,