<
https://www.theguardian.com/business/2023/feb/24/an-economic-fairytale-australias-inflation-being-driven-by-company-profits-and-not-wages-analysis-finds>
"Company profits, not wages, have driven the soaring inflation in Australia, an
analysis from the Australia Institute has found.
The thinktank has released evidence of what it calls a “profit price spiral”,
arguing big business earnings account for 69% of the inflation that is above
the reserve bank’s target range of 2-3%.
The Reserve Bank of Australia and its governor, Philip Lowe, have been warning
of a “wage-price spiral”, when price rises cause wages to increase which in
turn causes further price rises, which was an issue of the 1970s stagflation
period.
However Jim Stanford, from the Australia Institute’s Centre for Future Work,
has examined post-pandemic price rises and company profits and compared them to
wage increases.
Australia is in the midst of a supply side inflation shock, with price
increases being driven by breaks in supply chains because of the pandemic and
natural disasters, as well as energy supply disruption due to Russia’s invasion
of Ukraine. But companies have posted profits over and above those increases.
At a parliamentary hearing on Friday, Lowe admitted the central bank’s models
that guide its responses were “not well suited for supply shocks”.
Increases in labour costs account for just 18% of the inflation above what the
RBA wants to see before it eases interest rate increases. The most recent GDP
data shows Australian businesses increased prices by a total of $160bn a year
above taxes, labour and other costs.
Stanford says the evidence shows the additional billions of dollars in company
profits have led the soaring inflation Australia is experiencing."
Cheers,
*** Xanni ***
--
mailto:xanni@xanadu.net Andrew Pam
http://xanadu.com.au/ Chief Scientist, Xanadu
https://glasswings.com.au/ Partner, Glass Wings
https://sericyb.com.au/ Manager, Serious Cybernetics
