- Inflation rate is the rate that prices increase on average in a country
- The general ‘basket’ is determined by the Government
- General does not mean it is relevant to each and every person. This basket was compiled in 2017 and consist out 400 items and has not been updated since
- In SA the basket is used to calculate the CPI (consumer price index) representing the average spending of the consumers in SA
- The inflation rate is calculated by taking the items in the basket that consists out of the 400 goods and services over a 12 month period and to compare y/y to calculate the average increase in price.
- The Government determines the 400 items of good and services that goes into basket and represent the majority of the population.
- This basket in actual fact represent the lower income sector of the population and on not necessary the effect of price increases you and me experience
- The Government ignore the basic realistic facts the 20% of South Africans contribute 80% on the income taxes of the country
- General goods does represent the majority of the population, but not the good and services that the 20% of the population utiise
- Not included in this basket is meat, private schools, medical aids, cost of petrol and diesel, motor vehicles.
- As an example:
- petrol/fuel prices escalated in Dec 2021 by 40,5%
- Meat 8,6%
- New vehicles 9,6%
- Private Schooling 9%
Impact of inflation
- The value of your money reduces y/y. This means your investments, your earnings everything reduces as inflation increase.
- Your money devaluates and you can buy less and less with your money every year.