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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

#171

Post by monero-xmr »

naasking wrote: post #156
Khaine wrote: post #150

Earlier quoted context omitted.

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…

> Qantas has raised prices to ensure the flight demand meets what it can supply. This is weasly language for "price gouging". There's literally no problem with Qantas just selling the seats they had at reasonable prices and then saying, "sorry, no more seats available". Instead, you're trying to portray it as totally natural and just that they take advantage of any circumstances to squeeze as much out of their custom…

If there is 1000 units of something but demand for 5000 units, you increase the price until demand equals 1000 units. There is no conspiracy. This is fundamental economics.

“Market-think” is about freedom. The alternative is “authoritarian-think” and that always ends in tears. Just start setting prices by government decree and see what happens.

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

#172

Post by Khaine »

theteapot wrote: post #132
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 analy…

That's all our media do. Journalism is dead.

Also, like all central banks, he was trying to jawbone to get the results he wants without having to induce the pain of the action required. Even this week, there was talk of 3 more interest rate rises. He is hoping this will cut spending, reduce demand, and drive down inflation so that the interest rate rises aren't required.

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

#173

Post by Khaine »

TheSpiceIsLife wrote: post #78
opportune wrote: post #66

Earlier quoted context omitted.

In Australia the central bank rate is about 3% and inflation is much higher (I think 6-7% right now). There were goods shortages during COVID caused in part by broad increases in the monetary supply and difficulty in transportation (which is exacerbated by low unemployment, which is directly linked to aggregate demand, and hence interest rates). When unemployment is too low and inflation is too high, you are supposed…

Those conditions sing exist now. Who cares what the RBA rate is, let's talk about what mortgagees are paying on loans now. If the Australian government wanted to take money out of the supply it could, for example, (temporarily?) increase the GST and use that tax revenue to either / both pay back government debt or use it to ... pay public servants more. This concept that "the RBA only has one tool" is true as far as…

The rates you pay on your mortgage is strongly correlated with the RBA interbank rate.

You are absolutely right, the government could increase the GST to reduce demand. That would be political suicide, but fiscal policy absolutely can play a role. The government has abdicated from this, so it can blame the independent RBA and banks.

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

#174

Post by WalterBright »

dragonwriter wrote: post #119
WalterBright wrote: post #113

Earlier quoted context omitted.

Religion? You'll have to do better than that. Meanwhile, what's your take on the historical fact that gold rushes (when money was backed by gold) resulted in inflation? What's your take on the fact that the US had net zero inflation from 1800 to 1914, and endemic inflation ever since (except for a brief period during the Depression)? And why are oil price hikes always blamed for inflation, but when oil prices fall th…

> Religion? You’ll have to do better than that. The Austrian school is expressly, overtly, an unashamedly ideologically normative rather than empirically descriptive, which is why they are the example I cited. > Meanwhile, what’s your take on the historical fact that gold rushes (when money was backed by gold) resulted in inflation? That money supply changes can cause inflation is not the same as all inflation being…

> that its false

It's true. It had its ups and downs, and wound up just about where it started in 1914. Upward ever since.

> brief deflationary periods

You're nitpicking. https://www.in2013dollars.com/current-inflation-rate

Take a good look at it. The dollar has decreased in value since 1940 by a factor of THIRTY. Can you really explain that with the price of oil? Do you wonder why the inflation calculator starts at 1913?

https://www.bls.gov/data/inflation_calculator.htm

> A baseline bias to low inflation is a deliberate policy goal of the Fed

And thus you admit that it's the Fed causing inflation.

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

#175

Post by WalterBright »

pmontra wrote: post #6
WalterBright wrote: post #4

The wage-price spiral theory of inflation is bunk. Inflation is caused by the devaluation of excessive printing of money.

Central banks have been printing money for years (quantitative easing, "whatever it takes" , etc) and there was no inflation.

No inflation?

https://www.in2013dollars.com/current-inflation-rate

Chart sez you're mistaken.

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

#176

Post by hgomersall »

SamPatt wrote: post #168
neilwilson wrote: post #164

Earlier quoted context omitted.

"When inflation is actually driven by consumers having too much money, fine, go for it." Except that interest rates don't really affect that either [0] Inflation is always, everywhere, a lack of competition problem. Firms will charge what they can for their output. Inflation is causes by people paying that price because there isn't another alternative in the market, and 'no deal' isn't an option. [0]: https://new-way…

What is this nonsense? Inflation is always due to a lack of competition? Where on earth is the evidence for such an assertion (I didn't see anything in the linked article)? Inflation is a monetary phenomenon, it's not a mystery at all. Governments print too much money and then it's worth less. History is full of examples.

Except that the evidence shows that money supply increase doesn't necessarily lead to inflation. Countries that go through hyperinflation always have a systematic underlying problem that they use money creation to try to fix. "Ah ha!" declare the monetarists, "evidence for our assertion that money supply is the cause of inflation", conveniently ignoring all the counter examples.

The point of the GP post is that competition is how prices are reduced. There're buckets of economic theory that's at least as robust at the monetarist assertions that shows that prices drop when competition works properly. Every issue that underpins price rises is effectively a failure of competition. There are always winners from inflation:

https://economicsfromthetopdown.com/2021/11/24/the-truth-abo...

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

#178

Post by MrVandemar »

stephen_g wrote: post #125
jpgvm wrote: post #27

Earlier quoted context omitted.

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 r…

> Their whole monetary policy seems to be bunk.

It's mostly been under the management of a party who straight-out optimise for company profits and screw the little guy (who spent 10 years continually voting for them because Chairman Rupert said so).

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

#179

Post by MrVandemar »

neilwilson wrote: post #169
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?

Post Keynesian theory and endogenous money show how it works. Firms don't charge a 'market price'. They put a mark up on costs and sell as much as they can at that price. In other words marginal productivity theory is nonsense. When you do that, and you get a supply crunch as we have now, then prices will go up as we are seeing. It's fairly obvious. I will try to sell my stuff for the highest price I can get for it.…

> refuse to buy

Few do this. Television tells them they want things, and they'll get angry if they can't have them. So they put it on their credit-cards and kick the can down the road.

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

#180

Post by Too »

Aunche wrote: post #115
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…

>Most of it goes to the lie that is the premise that interest rates are really the optimal way to control inflation There are only 3 ways to decrease inflation: - Interest rates - Price controls. This tends to have a lot of harmful side effects, such as the necessity of rationing and discentivizing the production of whatever you're price controlling. You only really do this for a few goods, so this doesn't help overa…

Loans being secured with assumption of ever increasing property value is one big contributor to the current inflation. Especially once everybody started using their inflated house value as downpayment for their second house ad infinitum.

I’m sure someone smart can come up with many better ways to tame this, other than just turning the inflation knob.

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