Why understanding inflation is so important – Kganyago
Reserve Bank Governor, Lesetja Kganyago, says South Africa’s inflation is under control and the bank has plans in place to maintain it’s current policy to help protect the poor and ease inequality.
Kganyago, who was speaking at an address at the University of KwaZuluNatal on Tuesday evening, said that the central bank expects price growth to slow to 5.4% in 2018 and 5.5% in 2019.
This is on the back of a 6.1% inflation rate in March 2017, following continued international economic uncertainty and local political uncertainty.
“Low inflation is desirable for reasons beyond low interest rates. One of the most important is that inflation has adverse re-distributional consequences,” said Kganyago.
“Some people can protect themselves from inflation and even profit from it. Other people are less fortunate. Inflation is therefore essentially a regressive tax – a tax which impoverishes those whom society should really be helping.”
Real-world effects
In a breakdown of the real world effects of inflation Kganyago also highlighted the importance of educating South Africans about the current inflation rate and their finances.
“To protect yourself from inflation, you need knowledge, power and assets that hold their real value,” said Kganyago
“Inflation was 6.3% in South Africa last year. If your salary of R6,000 went up to R6,300, you did not get a raise because you only got 5% more.”
“You got a pay cut in real terms. If you had R20,000 in a savings account and you earned R1,000 in interest, you are now poorer than you were last year. Not understanding these concepts makes people vulnerable to inflation.”
Read: South Africa’s richest face three new wealth taxes: report
Loading ...