What is inflation?

Inflation is the increase in costs of goods over time.

The value of goods will generally rise over time. When I was a child, a can of coke used to cost $1 in my school vending machine, that same can of coke now costs $2 - this is the impact of inflation. 

Economists expect long term inflation to grow at 2% per annum and the economy is structured for this to happen. This means that my can of Coke should grow in price by 2% each and every year. In 20 years time, the can of coke will cost you $3 rather than $2. All goods will suffer similar levels of inflation. When preparing for the future, you need to take into account this inflation, you will still want to buy the same goods and services, but they will be more expensive. 

When we present your KiwiSaver outcomes to you, we present those numbers "adjusted for inflation" - this is to show you the true spending power of your future KiwiSaver balance.