Flourish - Latest Edition - Flipbook - Page 51
BY CON BARBAYANNIS, CPA
There is something
deeply frustrating about
doing the right thing with
money, putting cash aside,
watching your savings
account slowly grow, and
still feeling like you are
not getting ahead. For
many Australians, that
feeling is real. The issue is
not always that people are
failing to save. It is that
the value of those savings
can quietly shrink in real
terms, even while the
dollar 昀椀gure on the screen
goes up. In Australia,
annual CPI in昀氀ation was
3.7 per cent in the year to
February 2026, while the
Reserve Bank’s cash rate
target sat at 4.10 per cent
from 18 March 2026. That
means the gap between
what savers earn and what
rising prices take away is
still uncomfortably tight.
The di昀昀erence between saving money
and growing wealth
This comes down to one key concept:
nominal return versus real return. A
nominal return is the interest your
account pays. A real return is what is
left after in昀氀ation has taken its bite.
If your savings earn interest but the
cost of groceries, rent, insurance and
other essentials keeps rising at a
similar pace, your money may not be
gaining much purchasing power at all.
And if your effective return falls below
in昀氀ation, your savings are effectively
going backwards in real terms. ASIC’s
Moneysmart makes this point plainly
by noting that in昀氀ation reduces
purchasing power over time, meaning
a 昀椀xed amount of money buys less in
the future.
Why this is hitting Australians right now
Australia’s in昀氀ation story has cooled
from its earlier peaks, but it has not
disappeared. The Australian Bureau
of Statistics (ABS) reported that
the biggest contributors to annual
in昀氀ation in February 2026 were
housing, up 7.2 per cent, food and
non alcoholic beverages, up 3.1 per
cent, and recreation and culture,
up 4.1 per cent. So even if headline
in昀氀ation eases, many of the categories
households feel most sharply are
still climbing. At the same time, the
Reserve Bank of Australia (RBA)’s own
snapshot showed in昀氀ation at 3.7 per
cent, the cash rate at 4.10 per cent and
the household saving ratio at 6.9 per
cent as at late March 2026. Australians
are saving, but they are doing so in an
environment where the cost of living is
still heavy enough to erode progress.
