PPRuNe Forums

Interesting post from another forum:

Hong Kong inflation is at least 2.5%, so it seems illogical (or disingenuous) to offer a "cost of living allowance" that is not factored to cover the cost of living.

Using 2.5% and simple maths, $14,000 today must be increased to $15,840 in 5 years; $17,921 in 10 years; $20,276 in 15 years; and $22,940 in 20 years just to equate to what it will buy you today at a very low 2.5% interest rate.

And $40,000 would need to be increased to $45,256 in 5 years; $51,203 in 10 years; $57,931 in 15 years; and $65,545 in 20 years to be equal to what it is today.

Hong Kong has had historically dramatic swings in it's housing price increases, with increases ranging from 2.4% to 7.0% (see HK government data attached) including the 5 years from 2010 to 2014 incl. so using a 2.5% inflation adjustment is actually under achieving what has been the recent past rates.

Using a 4.0% inflation figure:

$14,000 jumps to $17,033 in 5 years; $20,723 in 10 years; $25,213 in 15 years; and $30,675 in 20 years.
$40,000 jumps to $48,666 in 5 years; $59,210 in 10 years; $72,038 in 15 years; and $87,645 in 20 years.

That's the power of compound interest, which the company is banking on saving from your lifestyle.

Please also be aware of the psychological phenomenon of "future discounting", it is already being studied in economic models, and works by assuming rewards that are closer in time will psychologically outweigh future greater rewards - rewards that your future self would have preferred.

Further: present HKPA levels have remained the same for past 8 years, and the ARAPA base level has been set at 24K for past 20 years, with no inflation adjustments.