How Do Rising Inflation Rates Affect Your Body Corporate?

Current Level of Inflation in Australia 

Australia is currently experiencing record levels of inflation as a result of knock-on effects from the COVID-19 pandemic, Russia’s invasion of Ukraine and strong consumer demand.

In January, the ABS revealed that Australia’s inflation rate had risen 7.8% for the year to December—the highest level since 1990—while quarterly inflation was up by 1.9%.

The 7.8% figure was slightly higher than many economists’ forecasts of around 7.5%, however, was in line with Treasury estimations that inflation would peak around 8% by the end of 2022.

With inflation at such high levels, the Reserve Bank of Australia (RBA) has continued its aggressive streak of hiking rates. In his statement on monetary policy, RBA Governor Philip Lowe has said that “a further increase in inflation is expected over the months ahead, with inflation now forecast to peak at around 8% later this year”.

“Inflation is then expected to decline next year due to the ongoing resolution of global supply-side problems, recent declines in some commodity prices and slower growth in demand,” he said.

What causes inflation?

Inflation refers to the process of goods and services becoming more expensive over time and in Australia it is measured by the CPI, or Consumer Price Index.

The RBA aims to keep the CPI between 2 to 3%, but a range of factors can increase demand on certain goods and services, pushing up prices. Inflationary pressures can be the cause of global disruption, supply chain constraints or high demand.

In simple terms, inflation is the reason your parents can talk about everything being cheaper “back in their day” while you have to fork out a dollar for a tiny packet of tomato sauce.

What is Causing the Inflation Rate to Rise?

Inflation is high in Australia due to a combination of factors. The economic recovery from the global recession caused by COVID-19 lockdowns has been stronger than expected, which is partly due to the government providing long-term emergency stimulus packages, such as the JobKeeper payments and HomeBuilder grants.

The higher costs of doing business have been passed onto customers, leaving everyday Australians materially worse off.

When will inflation peak?

The Reserve Bank of Australia (RBA), says inflation is forecast to peak at around 8% in 2022 before dropping in 2023. It is currently at 7.8%.

Effects on Your Body Corporate 

High inflation can have a negative impact on your body corporate.

Increased inflation leads to higher prices for goods and services, which can cause a rise in operating costs for the body corporate, such as maintenance expenses and utility bills. This can put pressure on the body corporate’s budget and may require them to increase levies or special assessments on residents.

Additionally, high inflation can make it more difficult for the body corporate to plan and budget for future expenses.

Overall, high inflation can challenge the financial stability and sustainability of a body corporate if not managed and planned for appropriately.

Increased costs

Expect costs will go up on almost everything, from the paper you print on, power bills and even the ink for body corporate seals.

In general, the costs for schemes to be run and maintained appropriately will go up and your body corporate should be planning for increases in the cost of insurance and sinking fund budgets.

Strata communities will have to plan ahead to fund this. If your body corporate hasn’t already started to address these issues, you need to, and Stratacare is here to help you.

Body Corporate’s with Caretakers

The massive increase in inflation can be particularly troublesome for body corporates with Caretakers, where the remuneration is usually fixed to national price increases.

If you have never looked at your Caretaker’s contract it is worth doing a review to help you understand some of the complexities. There can be many variations from contract to contract in terms of the inclusions and detail, but in general, every agreement will detail a range of services that the caretaker must provide in exchange for a salary over a fixed period.

The amount you pay the caretaker is typically linked to inflation, often using an equation that considers inflation for both the previous quarter and the previous 12 months to give a multiplier for the increase. The salary is guaranteed to increase year on year while the terms of service stay the same.

How Can Your Body Corporate Plan for Increased Costs Due to inflation?

There are several things that a body corporate can do to plan for increased costs due to inflation:


The body corporate should prepare an annual budget that takes into account the projected increase in costs due to inflation. This budget should be reviewed and adjusted regularly to ensure that it remains relevant and accurate.

Reserve Planning:

The body corporate should maintain a reserve fund to cover unexpected costs and to ensure that it has sufficient funds to cover any future inflationary increases. The reserve fund should be regularly reviewed and updated to reflect changes in costs and the impact of inflation.

Cost Reduction Strategies:

The body corporate should explore ways to reduce costs where possible. This could possibly include renegotiating contracts with service providers, implementing energy-efficient measures, and exploring alternative options for purchasing goods and services.

Seeking Professional Advice:

The body corporate may consider seeking professional advice from a financial advisor, accountant or body corporate manager to assist in developing strategies to manage the impact of inflation and plan for future costs.


The body corporate should keep owners and residents informed about any changes to budgets, costs, and strategies to manage inflation. Clear communication can help to ensure that everyone is aware of the impact of inflation and the steps being taken to manage it.

By taking these steps, a body corporate can plan for increased costs due to inflation and ensure that it is well prepared to manage any future increases in costs.

How Can We Help You?

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