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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

#131

Post by Nursie »

brutusborn wrote: post #18
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.

Maybe it’s not the only factor but surely it’s the major factor right now? Sure, we had a supply shock, but then we printed the most currency in history and got soaring inflation.

Nope, doesn’t seem that way, the world is reeling from a variety of economic shocks right now, from covid to the Ukraine war and resource-prices fallout.

“Printed the most money in history” is also one of those talking points that hides a massively complicated truth and doesn’t mean what people think it means. Soundbite economics (really soundbite anything) should be considered harmful.

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

#132

Post by theteapot »

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 in the broader public because of 2021 comments he made about there being no interest rate increases needed until 2024 [1].

He never said that. Actual primary source -- https://archive.md/uE4g3:

> ... This is the basis for our assessment that the cash rate is very likely to remain at its current level until at least 2024.

That statement is preceded by quite a long analysis, and discussion. His assessment was wrong obviously. He deserves flak for not being wise enough to not make such a strong assertion. But ... he never said unequivocally "no increases until 2024". It's quite frustrating seeing the media bludgeon those words into his mouth.

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

#133

Post by gruez »

thomjrob wrote: post #121
Khaine wrote: post #110

Earlier quoted context omitted.

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.

Presumably you think this is "whack" because you feel it's unfair that companies are making more in revenue without a corresponding increase in expenses. What about the reverse situation? ie. there is an oversupply/demand collapse, prices go down, but their input expenses stay the same so they make less money. We're seeing this in the semiconductor industry. Should we stand with them in solidarity by continuing to pay pre-collapse prices, and have internet commentators point out how it's "whack" for them to rake in less money even though their expenses hasn't dropped?

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

#134

Post by swatcoder »

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…

I think the OP is suggesting that there’s a “natural” market price that was perturbed by an extraordinary and temporary event, but that skewed/irrational customer perceptions and market inefficiencies let current sellers milk that perturbation for longer than the original disruption would theoretically warrant. And that this behavior can become a ratcheting change that drives price inflation entirely through profit-taking.

I’m sure there’s developed economic theory around this phenomenon and more sophisticated language than they used, but it felt like they got the point across.

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

#135

Post by chrismorgan »

firecall wrote: post #99
Grimburger wrote: post #19

Earlier quoted context omitted.

> 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…

> Only 30% of people have mortgages, why should the remaining 70% care Because the remaining 70% rent, with many wanting to own a property someday. Higher mortgages mean higher rent. Australia has very little social housing. Renting for families is an unpleasant experience. You can be forced to move with little warning, and finding a new rental in your area can be very difficult and sole destroying. So many would lov…

ABS figures from the 2021 census https://www.abs.gov.au/statistics/people/housing/housing-cen...>: 31.0% owned outright, 35.0% owned with a mortgage, 30.6% rented.

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

#136

Post by skissane »

swatcoder wrote: post #134
rcme wrote: post #122

Earlier quoted context omitted.

> 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…

I think the OP is suggesting that there’s a “natural” market price that was perturbed by an extraordinary and temporary event, but that skewed/irrational customer perceptions and market inefficiencies let current sellers milk that perturbation for longer than the original disruption would theoretically warrant. And that this behavior can become a ratcheting change that drives price inflation entirely through profit-t…

> I’m sure there’s developed economic theory around this phenomenon and more sophisticated language than they used, but it felt like they got the point across.

Isn’t this what economists call “elasticity”?

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

#137

Post by theteapot »

chii wrote: post #101
TheSpiceIsLife wrote: post #59

Earlier quoted context omitted.

Don't stop there. Extremely low rental vacancies are a result of? State governments, local governments, and property development, basically colluding to not build cheap and affordable high density housing.

> State governments, local governments, and property development, basically colluding to not build cheap and affordable high density housing. australian taxation is already one of the highest in the world. In order for the gov't to build affordable housing (high density or not), it would take even more tax revenue to pull off. I for one, will not want to pay more taxes. The free market works for food, so why not have…

> australian taxation is already one of the highest in the world.

Where did you pull that from?

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

#138

Post by chris_wot »

Two years ago I left a relatively low paid job to a more fulfilling, higher paid job. I get a small pay rise but have coped ok with the enormous increases in prices and interest rates.

I recognise not everyone is so lucky. However… there are plenty of jobs. Sadly, the only way to get a reasonable pay rise in Australia is to leave your job and go to another one. Your existing employer will need to pay market rates for a new enployee. They are just expecting you to dislike change.

Change jobs if you can if you are underpaid.

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

#139

Post by ThreeBeanPizza »

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…

The answer to the question of paying above market price is market power. When firms have market power beyond perfect competition they adjust prices above the theoretical competitive level where marginal cost = price. A change in supply generally, ie shrinking, gives firms more market power to charge higher prices => inflation. Intrest rates really don't touch market power so it is pretty fair to criticize interest rake hikes as a solution here. Intrest rate hikes also slow down business investment which makes supply less responsive. But it REALY depends on the market. If you are importing a lot of goods from compaies with a lot of market power right now, ex: oil, your domestic government and the fed of your country can't do much to fight inflation other then to tamp down economic activity overall with interest rate. What is really the issue is government policy to combat inflation has fallen by the wayside since feds are more responsive.

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

#140

Post by chii »

theteapot wrote: post #137
chii wrote: post #101

Earlier quoted context omitted.

> State governments, local governments, and property development, basically colluding to not build cheap and affordable high density housing. australian taxation is already one of the highest in the world. In order for the gov't to build affordable housing (high density or not), it would take even more tax revenue to pull off. I for one, will not want to pay more taxes. The free market works for food, so why not have…

> australian taxation is already one of the highest in the world. Where did you pull that from?

https://wisevoter.com/country-rankings/highest-taxed-countri...

Specifically i'm gonna call out income tax in australia :

Income Tax Rate 45%

Ranked in the World #17

> ... This means that Australians are paying a larger share of their wages in taxes compared with other countries.

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