Christmas is supposed to be one of the happiest times when family and friends come together to eat nice food, drink and have some time off work. But in 2022, it will be a different kind of Christmas because of ever-present inflation. The invisible piece of string that trips you over every time you buy goods and services. You can't see it, but you know it's there when you're spending $4 on a load of bread or $12 on a block of cheese (I'm using Australian prices here).
If you're a mortgage holder on a variable interest rate (like I am), you feel the pain of interest rate rises and inflation. It's a double whammy. It's hard to get into the Christmas spirit when the bank and greedy corporations have their hands in your pockets, looking for loose change.
I am usually the type of person who gets excited about Christmas. I get into decorating, the whole holiday vibe. But this year, I am not feeling it as much. I've become more mindful of the cost of everything. Every time the kids ask for something, I can feel my cortisol levels rising, the calculator in my head doing the math.
To battle rising inflation, the Reserve Bank of Australia has increased the cash rate to 3.1% from its historic low of 0.1% eight months ago. For Americans, it might not be easy to understand the significance of that until you learn in Australia, over half of the people with mortgages are on variable rates, so these increases are felt almost immediately.
The problem in Australia is the latest quarterly inflation figures came back at 7.3 per cent. Wage growth is only at 3.1 per cent. So, in Australia, we are going backwards. This means going back more than $3000 to $4000 a year. It's a significant fall.
You can see the price increases have been significant. Vegetables are up 17.2 per cent; milk is up 16.2 per cent, and coffee by 10.7 per cent. The parts of Australia that have not helped these prices have seen unprecedented historic floods (a couple of them this year), which have driven up the price of vegetables and dairy by quite a lot as production is affected.
We are being told that inflation is starting to peak in many economies, but I am not certain. Things feel a bit like the calm before the storm. Over in the USA, the markets seem to be celebrating that the Fed has become "hawkish"; undoubtedly, shit will hit the fan when the Fed and other central banks have to squeeze a little harder to tame inflation in the form of their rate rise hammer.
If inflation continues to rise, it will be hard to have a traditional Christmas of expensive gifts, lavish meals and overindulgence in sweets. We will have to start getting creative and find more cost-effective ways to celebrate the holidays.
Christmas is a time for sharing and giving, but it's also a time for being mindful of our financial well-being. So this year, inflation may steal Christmas, but it won't take away the spirit of the festive season.