# Inflation erosion?



## Ato (4 July 2009)

How much should one consider when thinking about inflation erosion of (cash) value?

As an example, if someone was to save 1mil in today's terms just by putting their savings into a bank by the time they retired, how much would inflation have eroded it's value? That is, 1mil in today's terms would equal how much in, let's say, 30 years?

I realise there's no way to say for sure, but a ballpark figure? 

What have historical figures been like?

So based on this, what should one do when considering inflation? Put 50% of that 1mil into an index fund or better?


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## johnnyg (4 July 2009)

You'd definitely want your money to be working for you some how, and greater then the inflation rate also. I guess it comes down to your appetite for risk.

I always like to think about for example putting $200000 under the bed or in a bank deposit say 30-40 years ago and what its worth today -> $200000~$500000?

Then compare that to buying $200000 worth of property at the time, (think large parcels of land on the outskirts on your town or city) and what that land value would be worth today.....5,10,15 Million?

Obviously it's not always that straight forwards but its an example I like to think about and remind myself of.


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## esolano (4 July 2009)

Some things to consider...

- Australia's average inflation rate is about 3.935% per year.
- If the money was in a bank paying you more than the above in interest per year then you would still be ahead I would think.

Try out this calculator:
http://www.rba.gov.au/calculator/calc.go


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## tech/a (4 July 2009)

An often over looked consideration.
My fater retired 30 yrs ago. He's now 85
At the time he had $400k and had a hobby farm.
Average house was 50K so was pretty well off--he thought so to.

Today he watches every penny---has worked part time up until a few years ago and is basically like any other pensioner.

Your money *MUST* be put to work.


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## kincella (4 July 2009)

well the dollar buys 5 cents today its lost 95% of buying power...now am not sure if that is from the 1930's or earlier....cannot find my source


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## esolano (4 July 2009)

tech/a said:


> Your money *MUST* be put to work.




Couldn't agree with you more. A lot of us work hard for our money. It is only fair that it works hard for us.


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## johnnyg (4 July 2009)

esolano said:


> Some things to consider...
> 
> - Australia's average inflation rate is about 3.935% per year.
> - If the money was in a bank paying you more than the above in interest per year then you would still be ahead I would think.
> ...




Make sure you take tax into consideration.

Small example, an older couple I know purchased 100 acres of land on the outskirts of their city in 1969 for ~$30000. It's taken 40 years but housing estates are slowly creeping closer and closer. I'd say within the next 10 years the property will be a new housing estate. They've had offers of $10millon+.

Not a bad return over 40 years.

Compare that to putting $30000 in a term deposit earning interest or stashed away under the bed.


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## kincella (4 July 2009)

actual inflation is much higher than the rate quoted....they removed the interest cost component from the cpi.....
since the cpi is used by many departments to pay wages, and pensions and other entitelments....which they try to keep paying a lower amount than the actual cost...if the cpi included interest costs...


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## Amor_Fati (4 July 2009)

esolano said:


> Some things to consider...
> 
> - Australia's average inflation rate is about 3.935% per year.
> - If the money was in a bank paying you more than the above in interest per year then you would still be ahead I would think.
> ...




If you were earning 4.5%pa (roughly the best I've seen around at the moment) you could very easily fall behind in real terms if you are paying tax at all. Even at 15% you will not keep up (4.5*0.85=3.825). At 45% forget about it. 

Obviously inflation and interest rates are somewhat correlated (both tend to be low in recessions and higher in booms) but do not forget about tax as they don't care if you are only matching inflation, they will take their cut.


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## matty2.0 (4 July 2009)

Average rates of inflation are about 2-3%. Compound that.


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## Ato (4 July 2009)

kincella said:


> well the dollar buys 5 cents today its lost 95% of buying power...now am not sure if that is from the 1930's or earlier....cannot find my source




Yeah, sometime around then. After the First WW iirc. Pretty staggering loss for the US dollar.



> My fater retired 30 yrs ago. He's now 85
> At the time he had $400k and had a hobby farm.
> Average house was 50K so was pretty well off--he thought so to.




That's a pretty sobering example Tech/A. I think you're right - the money in it's entirety must be put to work.


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## jet328 (4 July 2009)

esolano said:


> It is only fair that it works hard for us.




I've never seen my wallet get up and do some work! In my view this is one of the biggest cons from the finance industry sells just like "diversify & invest for the long term" ie. I've got no idea, so spread it round so I don't look stupid, while I collect my commissions uninterrupted

How can money work? If money really could work, why don't we print up a bunch and let it work for us? 

You're making the assumption that inflation continues like it has. In my view, this is probably the biggest reason for the current GFC. It was just conventional wisdom that the more you borrowed in shares/property the more you made. 

I won't get into the whole inflation/deflation debate but there are some very smart people betting on continued deflation. I also won't go into the fact that even after all this inflation, bonds/deposits in the US/Euro region have done very well over a significant period of time compared to the assets that "work for you"

In a deflationary environment "debt upto your eyeballs" won't be "working hard for you"


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## Nyden (4 July 2009)

jet328 said:


> In a deflationary environment "debt upto your eyeballs" won't be "working hard for you"




One doesn't need to be indebted up to the eyeballs just to have money working for them, though. In fact, one doesn't need any debt at all for that


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## johnnyg (4 July 2009)

Nyden said:


> One doesn't need to be indebted up to the eyeballs just to have money working for them, though. In fact, one doesn't need any debt at all for that




Very true, I don't think I've seen one post in the thread mention anything about debt.


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## trainspotter (4 July 2009)

Ato ... give ME ONE MILLION DOLLARS and come and see me in 30 years time. Then I will tell you my answer. To think that somehow between bank fees and the lovely ATO taxing you on your interest income PLUS variables etc. that you would have any money left in the account is bizarre.

Give me the chance to invest that amount in shares, property, bonds and whatever I can get my hands on (under your instructions of course) and I will safely say you will have ONE MILLION DOLLARS when I have finished. 

You would be better putting it inside your mattress and sleeping peacefully at night knowing that no one is going to rip you off. Let alone the banks.


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## bugmenot (4 July 2009)

johnnyg said:


> Quote:
> Originally Posted by Nyden View Post
> One doesn't need to be indebted up to the eyeballs just to have money working for them, though. In fact, one doesn't need any debt at all for that
> Very true, I don't think I've seen one post in the thread mention anything about debt.




Real Estate = Mortgage = "Debt up to your eyeballs"...


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## esolano (4 July 2009)

bugmenot said:


> Real Estate = Mortgage = "Debt up to your eyeballs"...




Look at the original post. ATO says nothing about Mortgage or debt. He talks about what would happen if someone save $1mil and puts it into a savings account. If you already have the money to invest in the first place, you don't need a mortgage.


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## trainspotter (4 July 2009)

matty2.0 said:


> Average rates of inflation are about 2-3%. Compound that.




Add CPI, TAX  and bank fees to that and you end up with ZERO. Stagflation at it's best.


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## Smurf1976 (4 July 2009)

2 to 3% inflation? I must be living on another planet as I'm pretty sure costs have risen a lot more than that. 

A few random examples I looked at. Just some random prices I could find, unfortunately not for basics like food.

Petrol has averaged 5.4% per annum over the past 27 years (4.5% average over the past 9 years)

LPG (household) 5.3% over 17 years

Electricity (household) 3.8% over 19 years

Cigarettes averaged 8.5% per annum over the past 18 years

Beer (at bottleshop) averaged 3.6% over the past 14 years

Average house price (Hobart) 7.7% over 13 years

Hot chips from local shop 5.1% over 24 years 

Take out the houses (bubble) and smokes (tax changes) and we're left with an average of 4.6% for those few examples. It's a very narrow base from which to calculate, but 4.6% sounds a lot more accurate than the "2 to 3%" to me based on real life experiences. The only real exception would be electronics, but it's not as though a normal person is spending on that every month and any saving there has been more than offset by the massive increase in the cost of a house.


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## Ato (5 July 2009)

trainspotter said:


> Ato ... give ME ONE MILLION DOLLARS and come and see me in 30 years time. Then I will tell you my answer. To think that somehow between bank fees and the lovely ATO taxing you on your interest income PLUS variables etc. that you would have any money left in the account is bizarre.




Yeah, I dunno really hence I was asking  

Here is something that is confusing me. I have some money (not the 1mil I use as an example, I wish lol) in the bank back in Oz. It's in one of those high interest rate account things. I've made a decent amount on interest, certainly far more than I've lost in taxes and charges. I've only had the account open for a few years, so inflation as such hasnt really changed all that much, I guess (and in the current clime, it's probably more a case of deflation).

So basically, that initial amount has increased and held it's value. (I wanted it as cash so please dont say I would be better off with something else.) I'm having trouble extrapolating that short term example of the money increasing and holding it's value over the longer term where people are suggesting it would lose a huge amount of value. I'm certainly not suggesting people are wrong, rather if someone could spell out what I'm missing that would be great.


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## esolano (5 July 2009)

Ato said:


> Yeah, I dunno really hence I was asking
> 
> Here is something that is confusing me. I have some money (not the 1mil I use as an example, I wish lol) in the bank back in Oz. It's in one of those high interest rate account things. I've made a decent amount on interest, certainly far more than I've lost in taxes and charges. I've only had the account open for a few years, so inflation as such hasnt really changed all that much, I guess (and in the current clime, it's probably more a case of deflation).
> 
> So basically, that initial amount has increased and held it's value. (I wanted it as cash so please dont say I would be better off with something else.) I'm having trouble extrapolating that short term example of the money increasing and holding it's value over the longer term where people are suggesting it would lose a huge amount of value. I'm certainly not suggesting people are wrong, rather if someone could spell out what I'm missing that would be great.




If you were to keep it simple as you said (cash in the bank), then I really don't think there's anything else that you're missing. We also have to factor in the power of compouding the interest. Sure you have to think about tax and fees and inflation but interest as illustrated in your example, should be enough to hold its value over that time.


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## alphaman (5 July 2009)

tech/a said:


> Your money *MUST* be put to work.



Not everyone can make his money work though. As Seinfeld says, money is lazy and tends to get fired!


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## trainspotter (5 July 2009)

*Noel Whittaker wrote this about 2 years ago. Should go somewhat to helping you Ato.*

We are now in a new financial year with negative news everywhere, so it’s probably appropriate to remind ourselves that there are three basic areas where we can invest our money – cash, property and shares.

Now, it’s a good feeling to have plenty of cash in the bank, especially when you can get a safe 8% as you can right now, but the problem with cash is that it has no tax benefits, gives you no chance of any capital gain and is eroded by inflation. 

A return of $8,000 on a deposit of $100,000 sounds attractive, but tax could take $3,200 leaving you with a net return of $4,800 or 4.8% - take off 3.0% for inflation and you are left with a net return of just 1.8%. 

_This is why holding cash over the long-term is one of the worst investment strategies of all._

In any event, there is a strong feeling that we are now at the top of the interest rate cycle, so in 12 months time you will be more likely to get 7.0% instead of 8.0%.

This leaves us with the good old faithfuls – property and shares. 

It’s important to have an interest in both these camps, but it’s just as important to understand that they behave in very different ways. 

It’s highly unlikely that your property will lose 30% of its value in a downturn, but there are ongoing costs such as maintenance, rates and land tax and it can be a long drawn out process if you ever try to sell it. 

Furthermore, if you opt for non residential property, you can find yourself stuck with vacancies of a year or longer.

Shares will give you a much more exciting ride because their values will bounce around, but the big advantage of them is that you can buy and sell in small parcels, they provide tax advantaged income by way of franked dividends and over the long term, have been the best performing asset class of all – an average of 11% per annum over the last 10 years even after taking the present slump into account. 

*That’s hard to beat.*


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## Ato (5 July 2009)

trainspotter said:


> *A return of $8,000 on a deposit of $100,000 sounds attractive, but tax could take $3,200 leaving you with a net return of $4,800 or 4.8% - take off 3.0% for inflation and you are left with a net return of just 1.8%. *



*

Hmm cheers, however where are these tax numbers coming from?

As a non-resident of Australia, I only pay 10% tax on my interest. So if we use the 100k example, that's $800 off in tax. Leaving me with 7200, or 7.2%, minus 3% inflation and we end up with 4.2%. Therefore the cash is holding it's value, and in fact increasing it.

Any help there?*


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## trainspotter (5 July 2009)

If you are happy with 4.2% on your money then ... go you good thing! Ooooops ... take off 3% inflation and you now have 1.2%. Bugger. Take off some more for bank fess and then? DAMNATION ... where all my money go?


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## Ato (5 July 2009)

trainspotter said:


> If you are happy with 4.2% on your money then ... go you good thing! Ooooops ... take off 3% inflation and you now have 1.2%. Bugger. Take off some more for bank fess and then? DAMNATION ... where all my money go?




Please re-read my post above Spotter.


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## kincella (5 July 2009)

isnt there a big flaw in this subject......last year, before Oct you may have got 8%...but bank deposits are closer to 4% atm...give or take a bit...the ones that pay the higher guarantee of 2% are offering a high rate....with the higher risk
sure if you had a 12 month rate....but dont expect that rate for ever....some friends whose term deposits expired are now seeing 3.5


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## trainspotter (5 July 2009)

Quite correct Ato, my son vacuuming the carpet at 110 decibels distracted my train of thought. (no pun intended) Sorry for my lacksidasical approach to this very serious matter.

I double dipped on the inflation thingy didn't I? There is another cost to come out of the profit. Just can't quite get head around boy and vacuum cleaner at the moment. Will respond once house is clean.

Kincella, the thread started with ... *Noel Whittaker wrote this about 2 years ago. * Should go somewhat to helping you Ato.


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## Ato (5 July 2009)

Look, I'm not arguing that cash is the worst scenario here, I'm just trying to get my head around it with some concrete examples, particularly as I've seen my own account increase in value, albeit over a short time.

Also, I'm wondering where these values of tax on interest are coming from?

So to summarise, please answer with concrete examples, with maths too if need be; and show me what the tax rates are.

Please dont reply saying something along the lines of 'Cash is crap LOLOLOL'.

Cheers


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## Ato (5 July 2009)

trainspotter said:


> Will respond once house is clean.
> 
> Should go somewhat to helping you Ato.




No worries, Spotter.

Yeah, I guess two years ago when market was high did mean I was making a decent amount on interest. If I was to say I get 3% now, I get 3000 on the 100k, however inflation is also down isnt it? Isnt the inflation rate about 1-2% atm in Australia? So 2700 after subtracting 300 for the 10% in tax, leaving 2.7%. If inflation is 2%, then that's 0.7% left - not very much. (I dont pay many fees, only about $10 per year)

Hmm just checked it, and the inflation rate till March is 2.5%, meaning I'd be left with 0.2% under the above scenario. That is pretty craptastic!

Hmm although, living in Japan might mean that isnt so bad as we have a -1.1% inflation rate here. Assuming exchange rates were favourable when I wanted my money, that would be okay...


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## trainspotter (5 July 2009)

I think the saying goes "CASH IS KING" at the moment.

No, inflation is not down at all to my knowledge in Australia. I believe (but I could be wrong) and I hope someone out there with the correct info will respond, that inflation is about 3.7%.

Money in the bank is fine because you don't have to work it. It sits there grinding away and compound interest is a wonderful thing.

WIll do a bit more research and see if I can post some terrific looking pie charts and graphics and sliding scales and other meaningfull stuff rather than my experienced rhetoric.


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## Ato (5 July 2009)

trainspotter said:


> I think the saying goes "CASH IS KING" at the moment.
> 
> No, inflation is not down at all to my knowledge in Australia. I believe (but I could be wrong) and I hope someone out there with the correct info will respond, that inflation is about 3.7%.
> 
> ...




Cheers mate.

Inflation rate is 2.5% (year to March) by looks of it. RBA site


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## kincella (5 July 2009)

may I suggest you do more research into how the CPI is rigged, instead of rely on a CPI rate....
for eg TV jumped in price from a range of 600 to 1000...but the price increase was not reflected in the CPI figures...the excuse was or words to the effect....the latest tv had more gadgets on it then the old one.....
hello....so when you go shopping for a tv and its almost doubled in price...but ignored for CPI purposes...what do you do ???
that is just one example....they try to keep the CPI figure low and distorted....its a sham....
so using a cpi figure of below about 6% will give you the wrong impression for your future calculations...
interest rates are also excluded.....hello...thats fantasy
an easier answer for you might be to compare the devaluation of your money..using house prices as a guide....houses rise in line with inflation
1986 median house price 80,800 by 2006 it was 396400 growth of almost 5 times....
so suggest your 100,000 today will be worth about 20,000 in 20 years time, or put another way....you will need 400,000 in 20 years to buy what you can today for  80,000


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## trainspotter (5 July 2009)

I was gonna say that !! But I was going to use the loaf of bread inthe future analogy. Loaf of bread today $4.00, loaf of bread in the year 2029 $132.00


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## kincella (5 July 2009)

no way...20 years...5 x 4.00 = 20.00


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## Ato (5 July 2009)

Yeah, fair enough. I do agree governments love to distort their figures to make things look better than they are. Didnt think about that when I added the RBA link. Sorry about that.

So with your examples, what does that make the rate? 

I certainly understand this analogy:


> or put another way....you will need 400,000 in 20 years to buy what you can today for 80,000



Tech/A made a similar one above. And they are quite sobering analogies O_O

But how do you calculate, rather accurately, what the inflation rate is?


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## kincella (5 July 2009)

no one can accurately predict the inflation rate, or the future ....
to make it simple... for a 1 year forecast....I would use the RBA rate plus 3%....or use the variable interest rates on offer....gives a similar figure...but a bit too low

5 years...I would use  the rates above compounded...or a flat rate of 7% pa...an increase of 35%
10 years a flat rate of 10-15%....or compounded...
just set up an excel worksheet and put the different scenarios / rates in there

using the house prices as a model...over 20 years ...increased by 5 times
so over 10 years use 2.5 times

link to the house price data
http://www.aph.gov.au/library/pubs/RN/2006-07/07rn07.pdf


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## Ato (5 July 2009)

Goodo, cheers.

However why are we using house prices as a base for inflation anyway? Why not compare salaries? Or other things, like consumeables?

The first paragraph from that pdf (bold mine):


> House prices in Australia have risen substantially over the past 20 years, *far outpacing the growth in inflation*, average earnings and household income.




I guess there are a bunch of factors for Australian house price growth, but as a number of those factors could skew the values we use for inflation, wouldnt we be better off not using house price as a guide for inflation?

Perhaps salary would be better? I dont know, as said, I'm pretty new to all this, but house price rises seem to be a little too extreme for comparison with inflation.



> no one can accurately predict the inflation rate, or the future ....




Very true. I live in Japan. There has been deflation here for a long time. A house that cost 1mil 20 years ago, now costs less than half of that! Hell the rented apartment I live in that cost the owner 300k odd just ten years ago, is now barely worth 100k.


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## kincella (5 July 2009)

OMG, Japan is very different....are you looking at the Australian economy for your projections or Japan....if its Japan forget everything I have stated
otherewise.....
you need to factor in different scenarios....I am sure the cost of housing should fit in there somewhere..
that report shows salaries went from a base of 100 to 204, or 22,000 to 56,700...depends what you are looking for...what you hope to achieve

Japan is a hard place to predict....there is no imigration, no comparison with growth that Australia holds....

have to take the dog for its grooming session, and some treats
cheers


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## Mr J (5 July 2009)

Strongly agree with Kincella - the rate of inflation is significantly higher than stated. Many important figures are not accurate, employment being another important one. I would count on at least 5% inflation, and my _guess_ would be that it's even higher. With a savings account, I believe we are losing money.



> why are we using house prices as a base for inflation anyway?




I don't think we should, as house prices should naturally rise over time, and are also affected by inflation/booms. I don't think salary is good either, as it is also affected. Anyway, which salary would you use? The median won't work since it will change over time due to changing demographics in the working population, changes in industry etc. 

As far as I know, there are no simple, accurate ways to calculation inflation. Even if we take a look at money supply, we still have to figure out how it is used and its influence.


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## nathanblack (5 July 2009)

Your in a very fortunate position. You say as a foreign investor you only pay 10% on your australian earnings, we pay our marginal tax rate(between 35%-45%) depending on our total income.

That puts you at a huge advantage to us.

Then you rightly state that Japan is in a deflationary environment. Australia is still inflationary(although lower than last few years).

Again huge advantage to you.

With those 2 factors alone, i would say a term deposit could earn enough for you to actually grow your money. Not saying that shares or property arent the better option, but bank deposit in you circumstances is adequate.

Example: $100k, 1year term deposit earning 4%.

Japan: 
100k*(1+(0.04*[1-.1]), assumes .1 or 10% tax rate

cash on hand after 1 year $103,600 after tax. assume negligible fees and currency conversion to Japan.
take deflation of 1% into account and its like you earnt a further 1% interst, so in 1years time you would have the equivalent of $104,636 in todays purchasing power.

Now consider Australian taxpayer living in australia
100k*(1+(0.04*[1-.45]), assumes marginal tax rate of .45 or 45%

cash on hand after 1 year $102,200 after tax. assume negligible fees.
take inflation to be 3%(ballpark figure) and its like being charged a fee of 3% on your total amount. so your left with $102,200*0.97 or $99,134 in todays purchasing power. effectively your money after 1year of investing is worth less than when u started. 

in that example the australian lost nearly 1% in 1year. not a lot but would be significant if compounded over 30year retirement 1.01^30 =1.35 (ie you lost 35% of purchasing power over 30years).

things for an australian to consider are housing has outperformed inflation, and many things are excluded from inflation calculations meaning your buying power in terms of realestate and other things may be substantially less.

also when people talk about inflation eroding ones nett worth the calculation are general comparing someone that had there money in an ordinary bank account earning 0% interest(or under there bed). in your example you are earning an amount that offsets inflation somewhat.


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## Smurf1976 (5 July 2009)

Mr J said:


> Strongly agree with Kincella - the rate of inflation is significantly higher than stated. Many important figures are not accurate



Basically the point I was trying to make with the few examples I posted. 

Hot chips from the local shop are pretty basic with no change in technology or unusual costs. And for my example it's the exact same shop, with the same man still doing the cooking and quite likely he's still using the same deep fryer. No radical change here, the chips still come wrapped in a big sheet of paper. 5.1% annual inflation in hot chips since 1985 when the store opened.

The bus fare to school in 1983 was 20 cents.

Lunch from the canteen was around 40 cents. 

You could then go back to the canteen with a few 1 and 2 cent coins and get some lollies.

Only rich people stayed in hotel rooms costing $100 per night. 

Things made in China might have become cheaper, but just about everything esle is up a lot more than 2% per annum in my experience.


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## Ato (5 July 2009)

Goodo, thanks peoples, those last few posts (Kin, MrJ, Nathan & Smurf) have helped me wrap my head around it, for the most part, I think.

I particularly like this from Mr J:


> As far as I know, there are no simple, accurate ways to calculation inflation. Even if we take a look at money supply, we still have to figure out how it is used and its influence.




I guess I have to pray for a good exchange rate at the time I want to bring my money back to Japan hehe.


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## kincella (5 July 2009)

smurf, with the fish and chips shop, the rent, and rates and interest costs would be enormous over time....I admire the man for still being there.....all ours have shut down...cause people did not want to pay the increased charges, but the shop keepers rents went up, land tax sky rocketed etc....

just found one around the corner...its 6.50 for the flake and 4.00 min chips...but hey I am grateful we have such a shop.....lost 3 others closer to me in past 3 years

I bet the cost of fish has increased from the wholesalers,and  cost of frozen chips, or fresh potatoes have increased......from about 25c a kg to lately 4.00

When I was out in Ringwood one day ....looking for my new puppy...I almost could not believe it...a fish and chip shop.....a Korean owner, chef....stunning food, beautiful and clean....almost empty for a Sunday....
I imagine its not all roses....maybe Fridays fish day for some...hard way to earn money....competing against maccas, and all the new fancy food stuff that people buy for lunch etc....
I like old fashioned food, and fish and chips is one of them, then maybe a real hamburger from the same shop, real mince or steak...very different from Macca's plastic type stuff
I was paying about 3.00 for the same meal in the mid 1980's....my income has increased a stack....so 10.00 seems fine for today...


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## Mr J (5 July 2009)

> very different from Macca's plastic type stuff




Don't get me started on the plastic that they serve. Can't beat a good home-cooked (or from a good independent take-away shop) burger. They're actually not bad for you either! I think it has more to do with time than people actually liking that crap. Most of us work long hours and feel like we don't have the time or just can't be bothered to make a proper meal. It has also been a while since we last ate, so we go for easy and fatty food.



> I was paying about 3.00 for the same meal in the mid 1980's....my income has increased a stack....so 10.00 seems fine for today...




That would be about 5%+ compounded. I've noticed a significant rise this decade, but that's to be expected during an easy credit boom.


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## Smurf1976 (5 July 2009)

Mr J said:


> That would be about 5%+ compounded. I've noticed a significant rise this decade, but that's to be expected during an easy credit boom.



There's that 5% figure again. Quite a few examples here all pointing to long term inflation being a bit over 5% per annum since the 1980's and that figure does seem more accurate to me than the 2 - 3% we're told by government.

Another one, wages. I've worked for the same employer since 1995 and that same entry level job there (which I no longer have) has increased at an average rate of 6% per annum over that time.


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## Mr J (5 July 2009)

That 5% savings or 10% stock return suddenly doesn't look so hot, does it? The 10% stock market return is even more horrible when one considers that the stock market apparently has not returned 10% (I read 8% for the Dow) and then considers how much the value will fluctuate due to booms and busts. That's a lot of variance for an extra 3-5%, and then tax must be paid!


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## brty (5 July 2009)

For inflation, try stamps from Australia post aka PMG.

In 1966 the first decimal 'Queens heads' were 4c. Basic stamp today 55c. That is cost increase of 6.25%pa over 43 years.

brty


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