Inflation
Inflation is the rise in prices of goods and services over time. When inflation climbs, it can reduce consumer purchasing power, meaning money buys less that year than it did in the previous year.
Example:
If you had around $3 in November 2015 you could buy 2 litres of milk. In March 2024, that same $3 would buy you less milk, or you’d have needed nearly $4 to buy the same 2 litres of milk.
The most common way to measure inflation in New Zealand is through indexes like the Consumer Price Index (CPI) and the Wholesale Price Index (WPI). Inflation can be viewed as both positive and negative. People who have assets like property or commodities, may like a little inflation because it may increase the value of their assets. But when inflation rises extremely high in a short period of time, it can topple an economy. This happened in Venezuela in 2018 when hyperinflation reached over 1,000,000% per month, which caused the country’s economy to collapse. Read how to be money smart when inflation climbs.
We acknowledge and thank the FMA, Dr Karena Kelly and Brook Taurua Grant, the RBNZ and the Māori Dictionary for their research which helped us with te Reo Māori kupu for this glossary.
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