Explainer · Inflation
Inflation is a rate. The shop is a level.
The CPI says how fast a basket is rising. It does not refund last year's prices, and it is not your particular trolley.
A rate of change, not a receipt
Headline CPI is the annual change in a weighted basket of goods and services. If it falls from 6% to 3%, prices are still rising. They are rising more slowly. The level you pay is higher than two years ago unless something has actually been cut.
Trimmed mean and weighted median throw out the noisiest items so the Reserve Bank can see the middle of the distribution. That is useful for a cash-rate decision. It is a poor description of rent.
Why your life disagrees with the average
Weights are national. If you rent in a capital city and drive a car, your personal inflation can sit above the headline for a long time. If you own outright and do not commute, it can sit below.
Living-cost indexes exist for that reason. They are not the target the Bank is required to hit. Mixing the two is how a press conference and a kitchen table end up shouting past each other.
Real means "after this number"
A wage rise minus CPI is a rough real wage. A bond yield minus CPI is a rough real yield. Both are only as honest as the price index you picked. Use the same index when you compare years. Say when you switch.