Inflation is here, but it might be worse than you think.
Andrew Leigh, the shadow assistant minister for Treasury, was tackling the big issues over at The New Daily the other day, lamenting the shrinking size of Malteser packets:
Freddo Frogs were reduced from 15g to 12g – but the price stayed the same. New varieties of Tim Tams mostly have nine biscuits in a pack, not the 11 biscuits you’ll find in the original pack. Many brewers have shrunk the size of their beers down from 375ml to 330ml, while some winemakers are selling 700ml bottles rather than the usual 750ml.
Dubbed ‘shrinkflation’ by US economist Pippa Malmgren, the term refers to a cunning trick that manufacturers like to pull: Selling us less product for the same price. In recent times, Maltesers fun-size bags have dropped in weight from 144g to 132g. Smiths chips have shrunk from 200g to 170g. A tube of Pringles has downsized from 165g to 134g.
It’s not just food that’s shrinking. Some years ago, Kimberley-Clark admitted to shortening the length of each square of toilet paper from 11cm to 10cm. The Australia Competition and Consumer Commission took several detergent manufacturers to task for slyly making their product less concentrated.
The problem is so insidious that the Australian Bureau of Statistics has had to specifically take account of shrinkflation in their measurement of consumer prices.
And then there’s housing, where the cost of an apartment today exceeds the cost of a house a decade or two ago.
Shrinkflation might not be so bad if real wages were growing. But when it comes to pay packets, the last decade has been a shocker. In the entire period since World War II, there’s never been a worse decade for real income growth – and that holds true even if we exclude the COVID pandemic.
According to the Morrison government’s latest budget, real wages are set to fall by 1.5 per cent this year, making the average worker $1355 worse off.
It’s a cute way to make a point but the point is right.
Inflation is coming. It’s not quite there in the data yet, but ask anyone on the street they tell you it’s here already.
(I actually asked at my local why the price of coffee had gone up, and the barista just shrugged and said, “inflation”.)
At the same time, wages are not growing. Real wages – your wages’ ability to buy the things you need at current prices – are going backwards.
That’s a process that’s going to leave many people worse off.
What’s the solution?
Obviously the solution is to wait for the government to adjust the macro-economic settings to deliver real wages gains for all Australians.
Lol. No its not.
The solution is to take charge of your own financial circumstances. Be the author of your own financial destiny. Get a big dose of chicken soup for the everyday transaction account.
Don’t sit around crying into your under-sized tim-tams.
Get out there and do something about it.
Just ask me how.