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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

#141

Post by andrekandre »

gruez wrote: post #111
andrekandre wrote: post #97

Earlier quoted context omitted.

> As opposed to what, them normally not trying to increase profits? yea, actually that. i dont think it would be unprecedented if some companies said "hey we are making a healthy profit already, so in order to not harm our customers we'd like to keep prices as they are or reduce them if possible"...

>i dont think it would be unprecedented if some companies said "hey we are making a healthy profit already, so in order to not harm our customers we'd like to keep prices as they are or reduce them if possible"... It won't be unprecedented that a few companies (especially founder/family controlled) showed alturism like this, but I'd be very surprised if a publicly held company straight up told its shareholders that i…

  > a publicly held company straight up told its shareholders that
the pressure to do the opposite (of just raising prices whenever opportune etc) would be much higher for sure and the usual incentives for cxo's are usually against that as well.

that being said communicating with investors what kind of company they are investing in and that they value long-term value than short term squeezing of customers is all valid and fair imo...

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

#142

Post by rcme »

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…

That doesn’t really make sense. Raising prices not supported by demand would result in less profit in theory. For instance, prices may go up in a supply disruption, but the loss in sales means suppliers earn less. So if prices were artificially high, it would actually be more profitable to lower them.

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

#144

Post by abigail95 »

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…

the theory and evidence behind it shows the opposite, "sticky prices" are usually always sticky in one direction.

wages is the biggest one, very hard to decrease wages but very easy to increase.

consumer goods are the same, it's easy to discount your stock to sell it - but if you raise it you have to deal with "price gouging" and "profiteering" and "causing inflation".

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

#145

Post by abigail95 »

lauraste1 wrote: post #74
abigail95 wrote: post #54

Earlier quoted context omitted.

If you're going to say there's a gap in theory, could you at least explain which economic theory is showing the opposite result here?

Google the Phillips curve - it's from the 1960s

explain why the phillips curve shows the opposite result to "every player in the food chain has taken advantage of supply shortage"

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

#146

Post by abigail95 »

phkahler wrote: post #70
abigail95 wrote: post #54

Earlier quoted context omitted.

If you're going to say there's a gap in theory, could you at least explain which economic theory is showing the opposite result here?

Show me an economist that uses the word hysteresis. Their models are quite primitive IMHO and not because they're powerful like the ones used in thermodynamics, but they act like they are.

this gives me nothing

i need an answer to

>yet another example of the gap that always exists between economic theory and economic practice

what is the practice and what is the theory?

edit:

if the person is saying food prices are sticky upwards, then they need to provide evidence for that because that's a very strong claim

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

#147

Post by naasking »

rcme wrote: post #142
swatcoder wrote: post #134

Earlier quoted context omitted.

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…

That doesn’t really make sense. Raising prices not supported by demand would result in less profit in theory. For instance, prices may go up in a supply disruption, but the loss in sales means suppliers earn less. So if prices were artificially high, it would actually be more profitable to lower them.

They wouldn't lose sales on necessary staples like eggs, milk and such, all of which have seen significant increases.

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

#148

Post by abigail95 »

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…

If I ask you a better tool to use than interest rates (nor deficit reduction either, which is being done) - are you going to MMT me? Is it worth my time to ask?

And do you mean to say that mean interest rates should be lower than they are now?

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

#149

Post by vkou »

anonuser123456 wrote: post #105
vkou wrote: post #9

Earlier quoted context omitted.

Every time your local bank issues a loan, it creates money out of thin air.

It also creates debt. And debt is a commitment to destroy that money that was created.

The solution to that problem is rolling it into even more debt. Zoom out to a multi-decade timeline, and that's pretty much what we have done in the real estate markets. Bigger mortgages and longer-termed mortgages have lead to an incredible expansion in the amount of money in circulation.

Yes, at some point, this reaches a steady state (which it probably has, I don't expect mortgage terms to keep growing), but that expansion of the money supply will absolutely manifest itself as inflation.

Which it did, in the asset markets. The only novel development last year is that it has finally trickled down to commodities.

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

#150

Post by Khaine »

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…

so lets look at this closely:

Banks - banks make more money when rates are higher, as they can get a bigger spread between what they offer savers and borrows. CBA, Australia's largest bank has a net interest margin of 2.1%. This means that the difference between the cost of interest paid to savers, and that borrows pay is 2.1%. This 2.1% covers all of the expenses and profit the bank makes. Banks make obscene amounts of money due to the volume and value of the loans. Amazingly, banks want to maintain their NIM, to ensure they can fund all of the compliance costs, risk management, and technology costs. If you looked at the Investor Presentation you would have seen that in the last quarter the NIM for CBA dropped which is why the share has been sold off. Due to strong competition in the banking sector

Qantas announced record profit because demand for flights is really, really high, but flight volumes have not returned to pre-covid levels. This is why flights are still very expensive. Again, inflation is on the demand side, to counter the increase in demand, Qantas has raised prices to ensure the flight demand meets what it can supply. You will note, Qantas is also actively trying to build out more flight capacity to cater to the excess demand.

Supermarkets, I already spoke to, down thread. This is a reversion driven by reduced costs from COVID. 'Mr Kierath said it was important to note the companies' profits fell in the last six months of 2021, so these results were rebounding off an unusually low base.'

Ergo, they look good because they were depressed in the prior reporting season. Ergo, it's just corporations bashing, because people are mad inflation is going up.

If you look at Woolworth's profits over time, it would look to be going back to normal levels[1] after a dip due to COVID. [1] https://www.statista.com/statistics/1116200/australia-net-pr...

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