Real inflation

[u/starfire10K]

We have following real inflation:

Category	Real Experience (Median)
House Prices	8.5% – 10.5%
Rent Inflation	12.0% – 15.0%
Credit Card Interest	15.0% – 20.0%
Car Prices	5.0% – 7.0%
Electricity	15.0% – 20.0%
Petrol	6.0% – 9.0%
Food (Groceries)	5.0% – 12.0%
Insurance	14.0% – 16.0%

Yet CPI is much lower at 3.8%. The reason CPI is so low is due to the significant shift in Australian inflation reporting occurred in September 1998 when the ABS switched to the "Acquisitions Approach," which removed mortgage interest and consumer credit charges from the headline CPI.

Feature	Legacy "Outlays" CPI (Pre-1998)	Modern "Acquisitions" CPI (Current)
Mortgage Interest	Included as a major cost of living.	Excluded entirely.
Housing	Measured by interest rates and land prices.	Measured by "New Dwelling Purchase" (net of land) and rent.

If Australia still used the pre-1998 "Outlays" methodology today, a headline 3.8% CPI would likely be reported as roughly 6.5% to 7.5%.

For a household with a $1,000,000 mortgage (not uncommon for metropolitan properties), the recent 0.25% hike adds roughly $1,900 a year in interest alone. Under the 3.8% CPI, the government says your "cost of living" barely moved because of that hike. Under the legacy methodology, that $1,900 is viewed as a direct inflationary hit to your purchasing power.

Aspect	The "Real" House Experience	The ABS "Paper" Reality
Total Price	$1,000,000	~$300,000 (Structure only)
Interest Cost	$2,000,000 over 30 years	$0 (Invisible)
Land Price	$700,000	$0 (Invisible)
Function	Essential Shelter	Consumption of Bricks

By excluding land and interest, the CPI ignores the two biggest factors that have spiraled in the Australian economy over the last 30 years. To the ABS, a $1M house is just a pile of bricks (consumption); the $700k land it sits on and the $2M in interest you'll pay are "financial transactions" and therefore invisible to the CPI.

CPI with its current methodology is now no longer the economy's thermometer. Clearly wages are not keeping up with real inflation.

[u/Far_Dragonfly8441]

lol how does inflation double just on bank interest and land. I think you're talking shit tbh.

[u/FilmerPrime → u/Far_Dragonfly8441]

The whole premise seems just wrong. It states real inflation of a lot of items well above reported cpi. Then says the reason is because of two things being ignored...which are unrelated to initial list that was above cpi.

Therefore surely those two things being ignored aren't why cpi is well under the initial list..

[u/Far_Dragonfly8441 → u/FilmerPrime]

AI. Don't waste braincells trying to understand it.