Inflation means the general increase in prices over time. The Reserve Bank of Australia targets an inflation rate of 2–3% per year. When prices rise, each dollar buys less — which is why your savings need to earn above the inflation rate to maintain their purchasing power.

Australia's long-term average inflation has been around 2.5–3%. However, 2022–2024 saw significantly higher inflation (above 6% at its peak) driven by supply chain disruptions, energy costs, and housing. Inflation has since begun moderating toward the RBA's target band.

This calculator helps you understand how inflation affects your money in practical terms — what will things cost in the future, and how much of your purchasing power are you losing by holding cash. For investment growth calculations, use our Compound Interest Calculator.