Over the past 20 years a yawning gap has emerged between the cost of living and our sagging standard of living as the prices of many of the goods and services we "need" have risen way in excess of the prices for our discretionary "wants".

It explains why many Australians feel poorer even though wages have risen over that period a little more than the official consumer price index, which measures inflation.

Recent figures show almost half of all Australians are struggling to get by.

Fidelity International's asset management specialist Anthony Doyle has tracked the price movements in "needs" versus "wants" since 2000, based on the sub-categories within the consumer price index.

While the official CPI has gone up 57 per cent, the prices of, for example, secondary and tertiary education, healthcare, childcare, insurance, housing and most utilities have increased significantly more than the CPI.

These are the goods and services that are high on the needs list for most Australians - and impossible to avoid.

Even the cost of food has risen faster than the CPI over the past 20 years.

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At the other end of the spectrum, categories of goods and services that have experienced deflation (relative to the CPI) are often those that are more discretionary such as clothes, cars, audio visual equipment (quality adjusted), furniture and toys and games.

Doyle says the compilation of a true cost-of-living index is just too difficult to do for statistical agencies because different people buy different things. He argues that we can get an understanding of the price pressures households face by looking at the underlying sub-categories of the CPI.

While the CPI is considered by all statisticians to be the best measure of inflation - it is not recognised as a tool that can track the cost of living nor the standard of living, according to Doyle.

"So we have this official CPI inflation measure which is the determinant of how the Reserve Bank acts on monetary policy - [in order to achieve] its main goal of keeping within its 2-3 per cent inflation target.

If you think about the real costs of life. The cost of some these components (of the CPI) have grown materially over the course of 20 years. Fidelity's Anthony Doyle

"But if you think about the real costs of life. The cost of some these components [of the CPI] have grown materially over the course of 20 years," Doyle says.

Since 2000, while the CPI has risen 57 per cent, the cost of hospital and medical services are up 195 per cent, preschool and primary education has increased almost 160 per cent while the cost of electricity has galloped ahead by 194 per cent.

At the other end of the scale, the cost of clothing and footwear is down 10 per cent and furniture prices have risen only 10 per cent.

Against this wages have gone up 78 per cent over this period.

Thus it is becoming increasingly difficult for many Australians to retain their standard of living or increase their savings.

"These are 20-year long-term trends and I can't see why it would reverse," says Doyle, who also argues that the implications for Australian investors are significant.

In its attempts to lift inflation from its current low level of 1.3 per cent the RBA has opted to ease monetary policy by further lowering the already low interest rate which is currently at 1 per cent.

The RBA's rationale is that this will stimulate businesses to invest, improve unemployment, increase consumer demand and raise prices.

"With the RBA cutting interest rates to all-time lows, it is becoming increasingly difficult to generate returns that will keep in line with some of these components that are rising materially," Dolye says.

So there is now increasing pressure on households to invest in higher yielding investments.

The bank savings or even the term deposit, or even government bonds are not yielding enough to offset the inflation in the cost of many of the goods that Australians ‘need’.

So many Australians and particularly older people that are living off investment income are being pushed, by necessity, into riskier higher yielding asset classes - particularly equities and property.