Calculate how inflation erodes purchasing power over time using ABS CPI data. Find the equivalent value of money in any year.
| Scenario | Real value after 10yr |
|---|
The Reserve Bank of Australia (RBA) targets inflation of 2–3% p.a. over the medium term. The ABS measures CPI quarterly across 8 capital cities. In 2022–23, Australian CPI peaked at ~7.8% — the highest in 30+ years.
| Period | Average annual CPI |
|---|---|
| 2024 | ~3.2% |
| 2022–23 (peak) | ~7.0% |
| 2010–2019 | ~2.2% |
| 2000–2009 | ~3.0% |
| Long-run avg (post-1993) | ~2.6% |
Inflation is the general increase in prices of goods and services over time, reducing the purchasing power of money. In Australia, inflation is measured by the Consumer Price Index (CPI), published quarterly by the Australian Bureau of Statistics (ABS). The CPI tracks the average price change of a fixed basket of goods and services consumed by Australian households.
The Reserve Bank of Australia targets CPI inflation of 2-3% on average over the economic cycle. When inflation persistently exceeds this range, the RBA raises the cash rate to slow spending and price growth — exactly what happened in 2022-2026.
| Period | Annual CPI | Key Driver |
|---|---|---|
| 2010-2019 (average) | ~2.1% p.a. | Stable, within RBA target band |
| 2020 (COVID year) | -0.3% | Deflationary pressures from pandemic |
| 2021 | 3.5% | Supply chain disruptions begin |
| 2022 | 7.8% | Energy prices, supply chains, housing |
| 2023 | 5.4% | Services inflation, rental prices |
| 2024 | 3.8% | Moderating but persistent services inflation |
| 2025-26 (current) | ~3.2% | Upper end of RBA target band |
The inflation calculator uses compound CPI: Future equivalent cost = Current cost × (1 + inflation rate)^years
| Item | Cost in 2015 | Equivalent Cost in 2025 (at 3% avg inflation) |
|---|---|---|
| Weekly groceries ($150) | $150 | ~$202 |
| Electricity (annual $1,500) | $1,500 | ~$3,200 (energy inflated far more) |
| University fees (Band 3) | ~$10,500 | ~$15,571 (+48%) |
| Median Sydney house price | ~$700,000 | ~$1,400,000 (+100%) |
What is the current inflation rate in Australia?
The Australian CPI inflation rate for the March 2026 quarter was approximately 3.2% annually, sitting at the upper end of the RBA's 2-3% target band. This contributed to the RBA raising the cash rate three times in early 2026 after cutting rates in 2025. Housing costs and insurance continue to inflate faster than the headline CPI.
How does the ABS calculate CPI in Australia?
The ABS measures CPI by tracking price changes of a fixed basket of goods and services that a typical Australian household buys — including food, housing, transport, healthcare, education, recreation, and clothing. The weights in the basket are updated periodically to reflect actual spending patterns. The main CPI release is quarterly, with a monthly indicator also published.
What is the difference between CPI and core inflation?
Headline CPI includes all items including volatile categories like fuel and fresh food. Core inflation (trimmed mean and weighted median) strips out the most volatile price movements to show underlying inflation trends. The RBA focuses primarily on trimmed mean inflation, which was approximately 3.0% as of early 2026 — slightly below headline.
How does inflation affect savings accounts?
If your savings account earns 4% but inflation is 3.2%, your real return is approximately 0.8% — your balance grows in dollar terms but only slightly in purchasing power. In June 2026, competitive savings accounts at 5.0-5.2% offer a meaningful positive real return above 3.2% inflation — one of the best real cash return environments in over a decade.