Inflation Should Be Viewed as Public Enemy Number 1

Source: Adobe/SERSOLL

Jannie Rossouw, Visiting Professor at the Business School, University of the Witwatersrand.

Inflation is a process of sustained increases in the general price level over a period of time, typically 12 months.

Inflation can be calculated for a country, for specific regions in a country and for different income and demographic groups, for instance pensioners.

These different calculations are important because the spending patterns of regions and groups differ. That means that their rates of inflation also differ. It is therefore important for each household to have a clear understanding of its own inflation rate.

A number of countries allow for the development of this improved understanding. For example, South African households can use an Internet tool such as the personal inflation calculator of Statistics SA . A personal inflation calculator, based on the spending patterns of household, is also available for the Euro areaCanada and New Zealand.

The phrase describing inflation as ‘enemy number one’ is borrowed from the research done by South African businessman Dr Anton Rupert on the world-wide inflation problem suffered in the 1970s.

He described inflation this way due to its distortive impact on the economies of countries and the wealth and financial well-being of households.

But the word inflation has a much earlier origin. Its first use was in the US between 1830 and 1860, when the US dollar started losing value.

In short, people experience inflation as sustained price increases. Prices continue to increase and the same amount of money buys less goods and services over time.