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Nov 16

Government Initiated Inflation

For the first time in a while I decided to have a detailed look at what has been driving the inflaiton results in Australia…and whilst our 2.8% inflation figure is near the top end of the RBA’s range, it is only at the top end because of government…not consumer demand as we are often led to believe. The main inflation drivers are…

  • Alcohol and Tobacco…surely due to increaed government taxes (or excise or whatever the appropriate term) and I’m sure the government doesn’t mind these inflated prices given the associated health costs…11.2% increase over 12 months
  • Education…most education is controlled by government …5.8% increase over 12 months
  • Housing…this obviously includes rents, and mortgage costs…putting up interest costs obviously has the reverse effect on this CPI input to other costs but the other housing cost that contributes is Rates…which is determined by your friendly local council….5.2% increase over 12 months
  • Health…lots to this but I’m sure the 8% increase in private health insurance premiums the government allows each year results in an 8% hike in related health care costs!…anyway…5.2% increase over 12 months

Our other core basic needs such as food, clothing, transport, communication, recreation, and household contents and services as a whole showed virtually no inflation whatsoever.

So whilst these other costs may be due for a price rise on the back of a stronger economy (sort of stronger…its really only a strong commodities related economy), if we’re really worried about inflation perhaps the government can remove some of their assistance in specific areas.

Personally I’m not worried about inflation at all…I’m more worried about the continued sick global economy and wondering what the next shock will be (Ireland banking system and its European relationship don’t appear to have much impact on us thus far??)

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