The word of the week in all the news media is “stagflation”. The RBA and our economic commentators and politicians are warning us to be afraid – very afraid – of it. But what is it?

Imagine your strata levies keep going up – insurance, maintenance, that endless capital works fund top-up – but the value of your apartment is going nowhere, rents are stuck and no one in the building can get a pay rise to cope with the soaring cost of living. That’s stagflation in a nutshell: prices rising while the economy sits still.

The word mashes together two things economies aren’t supposed to do at the same time:

• Stagnation: the economy stops growing. Businesses aren’t hiring, wages flatline, unemployment creeps up. Think of a building where no one’s renovating, no one’s selling, nothing’s moving.
• Inflation: prices keep climbing anyway. The cost of groceries, petrol, tradies, building insurance, everything – all heading north.

Normally you get one or the other. In a booming economy, prices rise because everyone’s spending and earning. In a downturn, prices usually soften because no one’s got money to throw around. Stagflation is the nasty combination: you’re getting poorer and things are getting dearer.

The strata analogy:

Picture an older Sydney block. The lifts are tired, the waterproofing’s failed, and the owners have just been hit with a special levy.

Meanwhile, your quarterly admin fund contributions have gone up because the insurance premium jumped 30%. But – and here’s the kicker – apartment prices in the building haven’t budged in two years, and a couple of owners are struggling to sell.

Owners are paying more to stand still. Nothing’s growing in value, but everything costs more to maintain. That’s the household-level version of what stagflation does to a whole country.

Why it’s especially rotten:

The usual fix for inflation is for the Reserve Bank to jack up interest rates, which cools spending and brings prices down. But higher rates also slow the economy further – which is the last thing you want when growth is already stalled.

It’s like trying to fix a leaking tap by turning off the water to the whole building. You solve one problem by creating a bigger one.

The classic case was the 1970s oil shock, when petrol prices exploded, economies stalled, and policymakers spent a decade trying to dig out. More recently, the post-COVID period had economists nervously watching for it again.

For apartment owners, the practical sting is this: rising costs on every line of the strata budget, sluggish property values, and a mortgage rate that won’t come down because the RBA is still fighting prices. Not a fun combination – which is exactly why economists treat the word like a swear word.

Got it? Okay, you’re ready for the weekly news feed from Leftfield Communications.

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