Inflation is prices rising across the economy. Not one avocado having a moment.
Inflation is easy to feel and easy to weaponise. The useful bit is knowing what is being measured, what is being ignored, and who benefits from pretending it is simple.
It is a broad price measure
Inflation measures how prices change across a basket of goods and services. In Australia, the headline number usually comes from the Consumer Price IndexConsumer Price Index A measure of price changes across a selected basket of household goods and services. Often shortened to CPI.. It is not your personal cost-of-living spreadsheet, which is why the official number can feel both true and wrong at the same time.
If rents, insurance or groceries are rising faster than the average, your life may feel harsher than the headline rate suggests. The average is not lying. It is just not you.
Headline and underlying inflation differ
Economists often look at underlying inflationUnderlying inflation A measure that strips out some volatile price moves to show the broader trend. Useful, but not magic. because petrol, fresh food and other volatile prices can jump around. That trend measure helps policymakers avoid overreacting to one noisy month.
Translation
Headline inflation is what people tend to feel. Underlying inflation is what policymakers tend to watch. Both matter. Anyone waving away either one is probably selling something.
The cause matters
Inflation can come from strong demand, weak supply, higher import costs, energy shocks, rents, wages, margins, or several of those at once. The cause matters because the fix changes.
Rate rises can cool demand. They do not grow lettuce, ship gas, build homes or make an overseas war cheaper. This is why the inflation debate becomes silly when everyone pretends there is one villain and one lever.
Inflation is not a vibe. Cost of living is. You need both lenses.