Suppose, though, that we did take out some of the ‘special factors’ that people nominate. Let’s, for the sake of argument, remove from the CPI rents and petrol, as well as the calculation of deposits and loan facilities. If we do that, the rate of inflation of the remaining items over the year to December 2007 is 2.1 per cent. No problem, right? Well, not exactly.
To assess the trend in inflation objectively, you cannot just take out items that rise in price, which is why we typically use underlying measures, which trim both extreme rises and falls. Suppose for the current purpose, then, that we also remove fresh fruit, as a very volatile item and one that happens to have held down the CPI over the past year, due to the unwinding of the great banana episode of 2005/06. Let’s also remove the effects of the child care rebate changes, treated as a price fall in the CPI, but which we know is a one-time effect and which reduced the CPI by 0.2 per cent.
If we do all that, we get a rate of inflation of 3.0 per cent over the year to December 2007. A little elementary figuring and a look at the quarterly profile, moreover, will tell you that, when this calculation is done for the year to March 2008, the answer is likely to be higher again. This is not all that far from what the statistical underlying measures, which dampen the effects of large rises and falls in a more systematic way, are telling us the trend inflation rate is now.
Stop spending. 
