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Analysis finds Australia’s inflation being driven by company profits, not wages

theguardian.com

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Re: Analysis finds Australia’s inflation being driven by company profits, not wages

#121

Post by thomjrob »

Khaine wrote: post #110
JumpCrisscross wrote: post #28

Earlier quoted context omitted.

> Australia Institute is a thinktank, funded by the Greens Source? If true, this doesn’t belong on HN.

This doesn't belong on HN, because its garbage analysis. From their 'analysis': "Record profits on petroleum and mining activities (reinforced by a spike in global oil and gas prices following the invasion of Ukraine) led this surge, but the overall corporate sector experienced the most rapid growth in profits of any comparable period in 35 years." So because of global shortages, commodity prices reached record highs…

"There are shortages, but if everything remains the same, they make more money"

???

That's a whack thing to say with a straight face.

Re: Analysis finds Australia’s inflation being driven by company profits, not wages

#122

Post by rcme »

zmmmmm wrote: post #21

It's yet another example of the gap that always exists between economic theory and economic practice. In this case, what we have is that every player in the food chain has taken advantage of supply shortage to eke out additional margin along the way. And why not? Your products are in demand and there are buyers who are willing to pay more than the theoretical market price. The actual situation is that even if competi…

> Your products are in demand and there are buyers who are willing to pay more than the theoretical market price.

What does this even mean? How can buyers be willing to pay more than the market price and the sellers still make more money? If such a case were to occur, it wouldn't be correct to call the old price the "theoretical market price." Basically, what you're describing is literally inflation: the purchasing power of money has decreased, so people are willing to spend more of it to buy their goods. Sellers recognize that the demand curve has shifted, and raise their price accordingly.

Re: Analysis finds Australia’s inflation being driven by company profits, not wages

#123

Post by Atsuii »

Grimburger wrote: post #19
chrishare wrote: post #11

There are so many threads here. The reserve bank governor is deeply unpopular in the broader public because of 2021 comments he made about there being no interest rate increases needed until 2024 [1]. As mentioned in the article, many companies are posting record profits, including supermarkets [2] - leaving low and middle income people hurting, and working more hours or side jobs. Those same people also face an adve…

> The reserve bank governor is deeply unpopular Only 30% of people have mortgages, why should the remaining 70% care, many can even put money in savings accounts again after 15 years of them being basically worthless. He never said interest rates wouldn't rise either, he basically said they don't forecast the conditions that warrant a rise won't happen until then. Here's a pro-tip if you took on too much debt under t…

It's not 30% of people, it 35% of HOUSEHOLDS were home owners of the dwelling there were in on census night, with there being a total of 9.8 million 'households' in the country. A massive % of Australians working age population have 1 or more mortgages.

Census dwelling data does not give an accurate picture of the number of Australians with mortgages. For example on my census our household reported that we rent the dwelling that we were in, because we do. We reported nothing about the mortgage we have on an apartment in the city that we moved out of 1 year earlier. According to that data point your using my household would be seemingly unaffected after interest rate rises outside of potential rent stress.

Re: Analysis finds Australia’s inflation being driven by company profits, not wages

#125

Post by stephen_g »

jpgvm wrote: post #27
zmmmmm wrote: post #21

It's yet another example of the gap that always exists between economic theory and economic practice. In this case, what we have is that every player in the food chain has taken advantage of supply shortage to eke out additional margin along the way. And why not? Your products are in demand and there are buyers who are willing to pay more than the theoretical market price. The actual situation is that even if competi…

Similarly lowering interest rates into the ground when consumers still had plenty of money but supply was constrained probably wasn't a wise move either. More targeted assistance of just affected industries during the pandemic could have prevented almost all of this.

True, that was a big part of the problem.

This is one of these “Doesn’t anybody see this? I feel like I’m taking crazy pills here” moments - dropping the interest rates didn’t do why we wanted (just pumps up property and equity prices with cheap money but doesn’t actually stimulate the economy), even some countries set them negative which didn’t work either, and raising interest rates has never been really shown to reduce inflation (just that you can raise them high enough to cause a crisis, which causes far more problems, and then hopefully by the time the recovery starts inflation contributors have abated…)

Their whole monetary policy seems to be bunk.

Re: Analysis finds Australia’s inflation being driven by company profits, not wages

#126

Post by [deleted] »

rcme wrote: post #122
zmmmmm wrote: post #21

It's yet another example of the gap that always exists between economic theory and economic practice. In this case, what we have is that every player in the food chain has taken advantage of supply shortage to eke out additional margin along the way. And why not? Your products are in demand and there are buyers who are willing to pay more than the theoretical market price. The actual situation is that even if competi…

> Your products are in demand and there are buyers who are willing to pay more than the theoretical market price. What does this even mean? How can buyers be willing to pay more than the market price and the sellers still make more money? If such a case were to occur, it wouldn't be correct to call the old price the "theoretical market price." Basically, what you're describing is literally inflation: the purchasing p…

[deleted]

Re: Analysis finds Australia’s inflation being driven by company profits, not wages

#127

Post by gruez »

stephen_g wrote: post #120
Khaine wrote: post #112

This is absolutely garbage, and doesn't belong on HN. From their 'analysis': "Record profits on petroleum and mining activities (reinforced by a spike in global oil and gas prices following the invasion of Ukraine) led this surge, but the overall corporate sector experienced the most rapid growth in profits of any comparable period in 35 years." So because of global shortages, commodity prices reached record highs, a…

In Australia businesses like supermarkets, banks, the largest airline etc. have just announced huge profits in their latest reports. I think the report definitely could have been better written, because a lot of the inflation is more due to passing on external cost increases, or domestic businesses raising their prices to account for inflation, and all keeping the same margins, hence resulting in larger profits in no…

> In Australia businesses like supermarkets, banks, the largest airline etc. have just announced huge profits in their latest reports.

As someone who isn't from Australia, can you provide some actual figures, preferably with historical comparison? Without specifics "record profits" doesn't mean much. The most banal interpretation is that profits in nominal dollars went up, which is totally expected given that the economy grows and there's inflation, making it almost guaranteed that each year has "record profits" even if all else was equal.

Re: Analysis finds Australia’s inflation being driven by company profits, not wages

#128

Post by stephen_g »

xyzzy123 wrote: post #89
thaumasiotes wrote: post #87

Earlier quoted context omitted.

There are two possible reasons: - The supply of money goes up. - The demand for money goes down. Neither wages nor profits are capable of affecting the supply. They might affect demand somehow, but it's not the first thing you'd look at.

Doesn't the supply of stuff also matter? How about people's expectations of future prices? How about global-market linked prices of economic inputs, foreign money supply creation? Etc. I think I could come up with 50 reasons why prices might increase if I sat down long enough.

Yes, understand what the parent is putting forward is a fringe theory. Some schools of economics like Austrian economics are obsessed with the money supply and ignore other factors that clearly matter a lot.

Re: Analysis finds Australia’s inflation being driven by company profits, not wages

#129

Post by gruez »

telchar wrote: post #118
Khaine wrote: post #112

This is absolutely garbage, and doesn't belong on HN. From their 'analysis': "Record profits on petroleum and mining activities (reinforced by a spike in global oil and gas prices following the invasion of Ukraine) led this surge, but the overall corporate sector experienced the most rapid growth in profits of any comparable period in 35 years." So because of global shortages, commodity prices reached record highs, a…

It’s so wrong to pretend that sellers don’t have a say in how much they ask for their goods that it borders on disingenuous. To blame the market (as if that existed apart from buyers and sellers) is to ascribe agency to something which is wholly responsive in fact. If buyers are willing to pay $80 for a barrel of oil, must BP ask for $80 and not a cent less? Of course not. You may claim they are right to do so, but d…

>If buyers are willing to pay $80 for a barrel of oil, must BP ask for $80 and not a cent less? Of course not. You may claim they are right to do so, but don’t pretend they have no choice and therefore no blame if there are ill effects to such pricing.

Since we're talking about commodities, prices are most likely set by bids/asks from all participants, rather than your model of a shopkeeper deciding what to write on price tags. If the current bid/ask for crude is at $90/$91, then there's no reason why BP should sell their oil at $80. Doing so would just end up giving $10 worth of value to whomever accepts BP's offer. In fact, you can even make it a business, by beating everyone else to the punch, buying oil at $80, then selling it back to the market at $90. The only way to avoid this is to sell the oil at market prices.

Re: Analysis finds Australia’s inflation being driven by company profits, not wages

#130

Post by Nursie »

refurb wrote: post #77
Nursie wrote: post #5

Earlier quoted context omitted.

Nope. That’s well known bunk from alt-economics. Convenient to Austrians and Libertarians who get to blame the government (again), but wrong. Money supply is only one factor in a complex system.

Calling expansion of the monetary supply and the resulting inflation "bunk" is hilarious. There are so many examples of inflation driven by monetary policy (Germany in the 1930's, Argentina, Venezuela, Vietnam) that denying the impact of money supply is just burying your head in the sand.

Who’s denying the impact?

The post I replied to said it was the only reason, which is a load of bull. I explicitly said it’s a factor in a complex system.

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