What is inflation?
Inflation is the rise in prices over time, which means the same dollar buys less each year.
The Reserve Bank of New Zealand aims to keep inflation between 1% and 3% a year over the medium term, with a focus on 2%.
For long term planning it is easier to work in today's dollars and use a real return, which is the return after inflation.
Example
At 2% inflation, something costing $100 today costs about $122 in ten years.