December 4, 2017

Compared to what?

From Stuff

Your summer pavlova costs more than 40 per cent more to make this year than it did 10 years ago – and commentators think that trend will continue.

That’s true, but prices now and prices ten years ago are in different currencies, and so shouldn’t just be compared like numbers.

Using the RBNZ inflation calculator, about half the apparent price increase is just currency conversion; a 2007 dollar is worth about 1.2 2017 dollars.

On top of that, incomes have changed over the past ten year. The median annual household income is up about 36%, so if pavlova is less affordable than in 2007 it’s mostly because of something like housing costs, not the price of cream and kiwifruit.

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Thomas Lumley (@tslumley) is Professor of Biostatistics at the University of Auckland. His research interests include semiparametric models, survey sampling, statistical computing, foundations of statistics, and whatever methodological problems his medical collaborators come up with. He also blogs at Biased and Inefficient

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