Bermudians should start living "beneath their means" to best ride out the global economic downturn, according to former Government statistician Cordell Riley.

"Just because you can afford something doesn't necessarily mean that you should have it," Mr. Riley, now an independent consultant, said.

Mr. Riley said the annual inflation rate for 2008 was very likely to be 5 percent or more, given that the monthly inflation rate reached 5 percent in August for the second time this year.

In 2007, the annual inflation rate was 3.8 percent.

That higher inflation translates to less purchasing power, he added. "For instance, while the inflation rate inches closer to 5 percent, the Island's banks pay 2 percent on average on savings accounts," he said in a press release. "For the average account holder, they are losing 3 percent of their money's value."

Mr. Riley spoke to the Bermuda Public Service Union's annual shop steward workshop last week. For unions, the implications of a five percent inflation rate are obvious, he said, "settlement targets are likely to be above 5 percent".

He also advises that consumers pay off unnecessary debt and look for investments that pay higher than 5 percent interest.