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Inflation & CPI
How the Consumer Price Index measures rising prices, and the RBA's target range for annual inflation.
What it is
Inflation is the rate at which prices rise over time, eroding the purchasing power of money. The Australian Bureau of Statistics (ABS) measures it via the Consumer Price Index (CPI), tracking the cost of a fixed basket of household goods and services each quarter. The Reserve Bank of Australia (RBA) targets a specific inflation band through monetary policy.
Who it applies to
Affects everyone, CPI is used to index pensions and payments, set rent reviews, and inform long-term financial projections.
Key figures
- RBA target band
- 2 – 3% per year, on average
- CPI publication frequency
- Quarterly (ABS)
- Planning estimate used across AussieCalc
- 2.5% p.a. (mid-point of RBA target)
Important limitations
Actual CPI varies significantly year to year and by spending category (housing and health often run above headline CPI). A single long-run average does not capture short-term volatility.
Official sources
- Australian Bureau of Statistics (ABS) - Consumer Price Index, Australia
- Reserve Bank of Australia (RBA) - Inflation
Educational information only, not financial advice.