There’s no inflation. The experts tell us so.
The Clerics of Martin Place, our highly paid monetary gurus at the Reserve Bank, have declared that there is negligible inflation in Australia. Here is their most recent inflation chart, up to 28 January 2021:
As can be seen from their analysis, for the last 5 or so years, inflation has been sub–2% and even briefly dipped to close to 0% (presumably) around the time of the first major Covid shock.
But hang on. According to the CBA:
[The] property housing market is on the verge of a boom and property prices are expected to rise as much as 16 per cent over the next two years.
Spartacus did 4 unit maths at school so that suggests an average of 8% per year. Does not asset price inflation count?
But hang on again. The Australian share market is in record territory, driven in great part by global negative to zero interest rates and money printing, Australia included. Isn’t that inflation?
No. The problem is that there is good inflation and bad inflation. For poor people and people without assets, all inflation is bad. For public servants, governments and asset holders, asset price inflation is great. Fan-fricken–tastic.
While inflation increases the cost of everything from food to rent to energy, for governments and asset holders, inflation is grand and dandy.
Governments, despite their rhetoric, LOVE inflation because it drives tax revenue. Asset price inflation drives capital gains tax, land tax and stamp duty revenue. Wage price inflation drives income tax revenue. Consumer price inflation drives GST and FBT revenue.
So when highly paid public servants who own their own home and probably other assets tell the great unwashed masses that there is no inflation, believe them. They are after all experts.
Central bank driven asset price inflation is not inflation. It’s something else. It’s special.
Stephen Spartacus blogs at Sparty’s Cast, where a version of this piece also appears.
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