Shocking graphic shows the staggering value drop of $100 in Australia - and it explains why everything is so expensive now
Australia's high inflation after the Covid lockdowns has dramatically reduced the spending power of consumers.
The buying power of $100 in 2018 would only be worth $81.45 in 2025, which would explain those skyrocketing grocery bills at the supermarket or expensive restaurant meals.
Before the onset of Covid in 2020, inflation had stayed firmly within the Reserve Bank's two to three per cent target.
From late 2014 to the end of 2016, inflation was even well under two per cent.
But that all changed from 2021, when average annual inflation levels more than tripled to 2.85 per cent as Covid supply chain constraints pushed up the price of goods.
By 2022, average annual inflation hit 6.6 per cent, after reaching a 32-year high of 7.8 per cent in the December quarter of that year as Russia 's Ukraine invasion pushed up crude oil prices.
This eased to 5.6 per cent in 2023 and 3.2 per cent in 2024, following a series of aggressive interest rate hikes.
While both headline and underlying inflation are now back within the RBA band, Californian-based data expert Ian Webster calculated that Australian consumers are now paying 1.23 times more for goods and services, compared with 2018.
That means the buying power of $100 seven years ago would only be worth $81.45 in 2025.
'A dollar today only buys 81.453 per cent of what it could buy back then,' he said.
Put another way, someone would need to spend $1.23 in 2025 to have the same buying power as a dollar in 2018, given that consumer prices have soared by 23 per cent during the past seven years, on a cumulative basis.
An Australian consumer would need to spend $6.15 today to have the buying power of $5 in 2018.
A lunch that cost $10 in 2018 would now conservatively cost $12.30.
A restaurant meal worth $50 in 2018 would now cost $61.50 while a meal for two that cost $100 seven years ago would cost $123 in 2025.
While annual headline inflation in the March quarter eased to 2.4 per cent, services inflation is still high at 3.7 per cent, Australian Bureau of Statistics data shows.
Little wonder Australian consumers are gloomy, with the Westpac-Melbourne Institute monthly sentiment survey for June showing pessimists outnumbered optimists.
A score above 100 indicates more Australians are feeling positive about the economy.
But this month, the score stood at just 92.6 points.
While this marked an improvement on May's 92.1 point level, Westpac's head of Australian macro forecasting Matthew Hassan said inflation was still dominating the minds of everyday consumers.
'Topic-wise, "inflation" remains the dominant news with the highest level of recall,' he said.
'The overall mood remains broadly unchanged with consumers stuck in a holding pattern of "cautious pessimism".'
The Reserve Bank's February and May rate cuts are at least making consumers more inclined to buy a major household good, the Westpac survey of 1,200 Australians found.
But slow economic growth and Donald Trump's tariffs are continuing to make Australians feel uneasy.
'More sluggish growth reads domestically and the unsettled situation around global trade are continuing to weigh heavily on expectations,' Mr Hassan said.
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