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Why things are getting more expensive

 

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You may have noticed on a recent trip to the shops that things are starting to look more pricey. There’s a reason for that.

Inflation is surging at the moment, which means the general cost of items like groceries, clothes, coffee and petrol has gone up.  Here’s what that means and what you may be able to do about it.

What is inflation?

Inflation is an increase in the price of goods and services, over a period of time. For example, a coffee that cost you $4 last year may now cost you $4.20 as a result of inflation.

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The opposite of inflation is deflation, which means the amount things cost goes down.

What causes inflation?

There are a number of different things that cause inflation to occur. Sometimes the materials that are needed to make goods go up in price and the flow on effect is an increase in the cost of the final item. Other times, increasing wages cause the price of things to go up at the same time.

What stops inflation?

When inflation gets too high, it can make it difficult for people to buy the things they need for their day to day lives. When this happens, the Reserve Bank of Australia may step in and increase interest rates. Interest rates can slow down inflation is by making it more expensive for people to borrow, which can mean people also reduce their general spending.

Ways to manage inflation

Even when things are getting more expensive, there are certain things we can do to make our money travel further.

  1. Look for discounts, sales and bargains – Sometimes waiting pays off, especially when things are getting expensive. Looking for sales or using coupons or discount vouchers can help to save a bit of money.
  2. Consider buying in bulk if you can afford it – Some items become cheaper if you buy more of them at once. This may include toilet paper, tissues and foods that are unlikely to go off.
  3. Cancel things you don’t need or want – If you have subscriptions to streaming platforms you no longer watch, think about cancelling them. It’s a good way to save some extra cash each month.
  4. Shop in season – If you choose seasonal produce, it’s often a bit cheaper than other fruit and veges. Apples and oranges are often great in winter.

This article is not a substitute for personalised financial advice. You can always speak to a free financial counsellor if you’re worried about money via the National Debt Helpline 1800 007 007. 

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