Some people benefit from rising inflation, but millions don’t. What’s your situation?

Inflation and interest rates are rising.

Next month, the Fair Work Commission will announce if it wants the minimum wage to increase so low-paid workers don’t slip too far backwards.

But how will businesses cope with a higher minimum wage?

Won’t it fuel more inflation and send businesses to the wall?

It’s the type of problem that could have ramifications for our faith in the system itself.

Inflation has risen sharply

If you think about Australia’s inflation cycle, it’s running well behind that in the United States.

Consumer prices here are increasing at an annual pace of 5.1 per cent, which is the fastest in 20 years.

But in the United States, prices are increasing at an annual rate of 8.3 per cent. They jumped above 5 per cent in the middle of last year.

See below.

US inflation

So, the US is well ahead of us.

It’s why a whole genre of stories has appeared in US media — which we haven’t seen in Australia yet — dedicated to explaining how businesses can profit from rising inflation.

When was the last time you saw many stories like that in Australia?

Quickly rising inflation isn’t something we’ve had to think about until recently.

why? Because between the financial crisis in 2007-09 and the start of 2020, we lived in an environment of declining interest rates, lackluster inflation, and weak wages growth.

But now things have changed.

After the lockdowns of 2020-21, inflation began picking up a little bit in the middle of last year and it’s quickened in recent months, catching the Reserve Bank by surprise.

At this stage, our inflation still isn’t as bad as the inflation in the United States, but authorities are getting nervous.

See below.

Australia consumer price inflation

Now, an inflation rate of 5.1 per cent might feel like it’s understating things, because prices of some key goods are growing much faster than that.

If you drive a car that runs on petrol or diesel you’ll know what I mean.

At the moment, it costs me well over $100 to fill my tank. That’s never happened before. It used to cost $70.

The hit to my weekly budget has been significant, and the flow-on effects have been immediate.

Walk into a supermarket, and it’s a similar experience.

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