Common Inflation Mistakes (and a Better Way)

Updated 11 August 2026 · Savings and investing

A Inflation Calculator gives a fast answer, but the answer is only as good as what goes in. These are the mistakes we see most often with inflation calculations in Australia, and how to avoid them.

1. Comparing total rather than annual returns

Always convert returns to a yearly rate before comparing investments held for different periods.

2. Chasing bonus rates without meeting conditions

Missing a deposit or making a withdrawal can drop a bonus saver to its low base rate.

3. Forgetting tax on returns

Interest is taxed at your marginal rate, so a 5% account may return closer to 3.4% after tax.

4. Ignoring inflation

A return below inflation means your money buys less over time.

5. Overlooking the detail that matters most here

The RBA targets inflation of 2–3%. Savings earning less than that lose real value.

How the future cost of the same goods changes with inflation rate

A common mistake is getting one input slightly wrong. Here is what happens to the future cost of the same goods when “Inflation rate (%)” is off by up to 20% in either direction, with everything else held steady.

Inflation rate (%)	Future cost of the same goods
2	$121.90
3	$134.39
4	$148.02

At 2 the result is $121.90; at 4 it is $148.02. If a small change in this input moves the answer a lot, it is worth double-checking that figure before you rely on the result.

A quick sense check

Future cost = amount × (1 + inflation)^years. With typical inputs the calculator returns future cost of the same goods of $134.39. If your own result looks wildly different, check that each figure is in the right unit and period (weekly, monthly or yearly) before drawing conclusions.