Please ensure you've read https://help.canwi.com.au/en/articles/10694176-inflation to understand basics of inflation
If you think about how the purchasing power or value of money changes over time you’ll realize that different things change in value over time at different rates for instance;
Goods & services purchased by Australian households (e.g. Groceries) typically change in price (increase!) over time → A metric which is used to track this is CPI or Consumer Price Index which in Australia, the Australian Bureau of Statistics (ABS) measures quarterly and includes a breakdown across a number of different categories (e.g. Transport, Education, Clothing & Footwear, Alcohol & tobacco etc). The government targets to keep inflation at between 2% - 3% percent annually and uses levers like policy and the RBA’s control of the cash rate to achieve this.
Wages - Typically, most employers - recognizing that the cost of living is ever increasing will conduct a wage review on a roughly annual basis (currently the average time between reviews is 1.25 years) and adjust them to help keep up with the cost of living and reflect a view of the change in productive output from a job. There are multiple measures of this Wage growth, by Wage Price Index is a commonly used metric from the ABS. In Australia the government targets wage growth of 3.7% per annum.
Property (This one's in a league of its own!)
Now here’s where things get interesting.
Unlike groceries or wages, property prices have historically grown much faster. In Sydney, for example, the average home price has increased 17 times over the past 40 years.
This growth is tracked by the Home Price Index (HPI). In 2022, national residential prices surged by 23% across Australia’s capital cities, and Sydney saw a rise of 11.4% between January 2023 and January 2024.
So when someone says:
“I want to buy a home worth $1 million in 2035”
You need to clarify:
Do you mean a you're going to take a bag of physical cash with a face value of $1m out (i.e. Not adjusted for inflation)
Do you mean the equivalent of $1 million in 2035 (i.e. Adjusted for consumer inflation)?
Or do you mean a home like the one you see today for $1 million? (i.e. Adjusted for property growth)
So How Should I Think About It?
“I want to spend $1 million in 2035”
This is a future-dollar target. If inflation is 2.5%, that $1m is worth only around $780,000 in today’s money. If it’s for groceries, holidays, or general spending and over a short timeframe - this might be a reasonable way to plan.
| To achieve this in Canwi - leave the "Adjust for inflation" toggle off  |
“I want to spend the equivalent of $1 million (today’s value) in 2035”
This is a CPI-adjusted target (today's dollars). You want the same general purchasing power in 2035 as $1 million gets you today. (keep in mind that general purchasing power is for goods and services!)
| To achieve this in Canwi - switch the "Adjust for inflation" toggle on 
|
“I want to buy a home like the one I see today for $1 million”
Here’s the kicker: if property inflation is 10% per year, that same home could cost more than $2.5 million in 2035.
Not currently available - coming soon!
TL;DR: Inflation Isn’t One-Size-Fits-All
Expense Type | Average Growth Rate | What to adjust for |
Groceries, holidays | ~2.5% | CPI (Consumer Price Index) |
Wages | ~3.7% | WPI (Wage Price Index) |
Property | ~6-10% | HPI (House Price Index) |
Example: Planning a Future Home Purchase
You see an apartment today worth $500,000 and want to buy something similar in 10 years.
If property prices grow by 10% annually, that same apartment could cost around $1.3 million in 2035.
Planning to save “$500k adjusted for CPI” might only get you around $640k by then - not enough for your dream home. You’d need to adjust your savings goal based on property price growth, not CPI.
If a home is currently worth $4 million and grows at 6.7% per year, in 10 years it would be worth approximately $7.65 million.
If you're wanting to buy it then, and thinking in today's dollars - assuming inflation is 2.5% per year, you'd need the equivalent of about $5.98 million today to buy that same home in 10 years.