Australia's inflation rate jumps to 5.1%, how to protect your wealth with inflation on the rise?

The Australian Bureau of Statistics on Wednesday announced its quarterly Consumer Price Index (CPI) figures. Its headline figure, the annual inflation rate, jumped to 5.1 per cent after a 2.1 per cent quarter.

Economists are now generally expecting an increase in the cash rate in June after RBA governor Philip Lowe dropped the long-used word "patient", saying inflation and wages data would be the focus in coming months.

Nobody knows for sure how high inflation will go in the future. The bears say a 1970s-style inflation shock is imminent. The bulls say Australian inflation will lift, but that rate rises will be gradual and are priced in.

What do market experts recommend? Let's jump into some of their ideas ! If you're enjoying this article so far please make sure to give a like and please consider following this account because I write articles about investing every single week.

Portfolio Strategies
Market experts recommend a carefully targeted portfolio including commodities and companies with pricing power to help avoid negative returns and loss of purchasing power.

Paul Taylor, head of investments at Fidelity International, says investors should adopt a "barbell strategy" in their share portfolio. "At one end of the barbell are commodities: mining, energy and natural-resource companies that do better when inflation rises. The barbell's other end includes companies with pricing power: consumer staples, healthcare, utilities and bank stocks, to a point. Companies that provide the essentials and can pass on higher costs to consumers."

Stock Picks
Julia Lee, chief investment officer at Burman Invest, says there is a "flight to essentials" as inflation rises. "That means going more defensive by owning telecoms, utilities, supermarkets, food-related stocks and insurance, for example. And avoiding companies that need to raise a lot of capital to grow and other speculative investments."

Burman owns QBE Insurance Group, Incitec Pivot, Woodside Petroleum, Woolworths Group and BHP Group. "We like $QBE Insurance Group Ltd(QBE.AU)$ because insurers can pass on higher premium costs to customers. Incitec Pivot is a play on rising fertiliser demand in agriculture. $Woodside Petroleum Ltd(WPL.AU)$ is benefiting from higher oil prices. Woolworths and other big supermarkets tend to do better when inflation starts to rise. BHP benefits from higher commodity prices."

Nathan Bell, head of research at Intelligent Investor, says "Beating inflation and higher interest rates means buying value, and there's a lot more value in small caps after recent share-price falls than there is among the big names, which are generally very expensive," says Bell.

He nominates RPMGlobal, a mining-software company, as an example of small-cap value. " $RPMGlobal Holdings Ltd(RUL.AU)$ trades at a fraction of typical software companies," says Bell. Another preference is 360 Capital, a listed property group. "It trades on a 6% fully franked yield and at around its net tangible assets, which means you get its funds-management business for free."

Audinate, a digital audio company, is another preferred small-cap. "Audinate should produce very high margins as the business matures over the next decade," says Bell.

Companies mentioned by Burman and Intelligent Investor