Inflation is calculated on a basket of goods based on research by Statistics SA that should reflect the average South African’s spending pattern. But the problem with averages is that no-one is average – and if your basket differs significantly from the consumer price index (CPI) basket, then you’re experiencing a very different inflation rate.
COST OF EDUCATION
According to Statistics SA, education costs comprise nearly 3% of a household’s expenditure. For a household with an income and expenditure of R50 000 per month, that would equate to around R1 500 per month.
For a fee-based government school for one child, that might be the correct figure – but for a family with two or more children, the amount they’re spending on education is likely to be closer to 6% of their monthly costs. Given the costs of private schooling, many families find themselves spending as much as 10% of their income on education – which increased by a massive 9,8% over the past year. The higher the percentage of your budget that you’re spending on education, the higher your personal inflation rate.
COST OF FOOD
Food and non-alcoholic beverages on average increased just above inflation at 5,9%, but vegetables, as well as oils and fats, increased by 9,4% and 14,1% respectively – so households who purchase more vegetables, oils and fats than other people would experience higher prices.
COST OF FUEL
The CPI basket provides 4,18% for electricity and other fuels, which works out to about R2 090 per month for a household with a R50 000 budget. If your fuel bill is higher than that, your overall inflation rate will be higher too.
UNAVOIDABLE CONSUMER COSTS
It’s also worth noting that administered prices like electricity and water went up by 11,1% and 9,8% respectively. These are costs consumers can’t avoid, as they relate to essential goods and services, unlike a decision to buy a new car or book a package holiday (both of which have experienced far lower price increases).
Ironically, if you’d spent a portion of your budget on a package holiday or a new car, your overall inflation experience would be lower, as the prices of these goods and services increased below inflation. However, in difficult financial times, people spend less on luxuries and more on necessities.
Unfortunately, any salary increases you get aren’t based on personal inflation, but on average inflation – which is why it’s getting harder each year to make ends meet.
* The inflation figures mentioned in this article are based on the December 2015 CPI Index Report. |
