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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

#261

Post by Khaine »

tallytarik wrote: post #234
Khaine wrote: post #187

Earlier quoted context omitted.

Common sense. Employees can import foreign labour which has the effect of putting downward pressure on wages. Hence why wage inflation has stalled since COVID restrictions have been eased. And in terms of rental market, it has been widely reported. Westpac has forecast that Australian rents will continue to hyper inflate until mid-2024 because of soaring international migration. Westpac Business and St George senior…

Thanks for answering. > Employees can import foreign labour which has the effect of putting downward pressure on wages. You didn’t cite any sources here, and according to [1] this is wrong. In response to your comments about the rental market, I noticed you picked a source that is overwhelmingly anti-immigration. (I counted 4 more articles either linked or ‘recommended’ that described in varying terms how immigration…

I didn't think I needed to provide evidence, because it is common sense driven by basic supply and demand.

You want a developer, then if all or nearly all developers are employed you need to offer higher wages to them to defect to your company. If however you can import an immigrant and pay them the same or lower wage (which is better than they get in their home country), then suddenly you don't need to offer a higher wage to local developers.

The fact that I need to explain, and prove, this to supposedly intelligent people is frankly mind boggling.

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

#262

Post by 2devnull »

Inflation can be measured with and without wages. That’s one of the first things to know about inflation. Inflation with inflated wages is arguably a bigger concern. I didn’t read the article but the headline is good news for Australia.

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

#263

Post by gruez »

naasking wrote: post #153
gruez wrote: post #127

Earlier quoted context omitted.

> 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 eco…

I won't speak to Australia, but Rep. Porter did a decent job of that here: https://youtu.be/udITRL9-t08

I'm not sure whether youtube is broken for me, but the linked video caps out at 480p resolution and on top of that it's letterboxed. As a result it's impossible to see what the chart is actually saying, or where the data is sourced from. Reading the transcript, the date range for the figures is "pandemic period" and "recent period", which means the comparison is probably bunk as a result of cherry picking.

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

#264

Post by gruez »

naasking wrote: post #242
monero-xmr wrote: post #171

Earlier quoted context omitted.

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.

> If there is 1000 units of something but demand for 5000 units, Except that's not the case here, both supply and demand for eggs and milk have not changed much, neither have the costs to produce either. That's why prices are skyrocketing and profits are soaring. Look, the data is out there and very clear on this point: https://www.youtube.com/watch?v=udITRL9-t08

>both supply and demand for eggs [...] have not changed much

https://en.wikipedia.org/wiki/Avian_influenza#United_States_...

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

#265

Post by gruez »

jay_kyburz wrote: post #197
monero-xmr wrote: post #171

Earlier quoted context omitted.

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.

In the case where products can be profitably produced at a cheaper price, the people should band together, put aside the market system, and produce all 5000 units. More people are served. If its costs $100 to fly somebody from Sydney to Melbourne and Qantas is selling tickets for $1000, Australians should run an airline and sell tickets for $200. Governments should get into the business of keeping markets competitive…

>the people should band together, put aside the market system, and produce all 5000 units. More people are served.

You just described a command economy, which have a poor track record historically.

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

#266

Post by gruez »

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…

>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 customers as possible.

Would you not have done the same? Seeing that we're on HN, there's a good chance that you took advantage of the pandemic tech bonanza (ie. tech companies paying astronomical amounts for developers). If you were currently making $150k, and some tech company was offering you $250k, would you turn down that offer because you want to sell your labor "at reasonable prices"?

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

#267

Post by kurthr »

Blackstrat wrote: post #260

Inflation is not caused by profits or wages. Read Friedman. No one has yet made a convincing argument that he was wrong. Inflation is a monetary phenomena, not a function of normal supply & demand. In other words, it's precipitated by governments monetary practices. Look at the US, who spent 15+ years with very easy money. Now they are inflating like crazy. Proponents of Modern Monetary Theory are either ideological…

Hahaha... tell me more about whether bank reserves really matter, or reverse repos count and how many EuroDollars there are in "circulation". Even people at the Fed know they don't know. The global credit machine and rehypothecated swaps are both the liquidity that keeps things going and the confounding variable that makes any estimate of "money supply" hilarious. How many years (and $T) of QE was there... and nothing. Then supply chain breakdown and poof! You might as well argue it was caused by "printing bitcoin".

https://youtu.be/pn8nh0jUvbs

Talk to an honest graduate economist. These are all inputs to a complicated foul smelling brew. I'm not arguing that debt doesn't increase risk (eg doesn't matter), but (especially when repaid) it can easily be deflationary. I will argue that we had a perfect storm of deflationary pressures (high initial rates, rising productive demos, globalization) and now we have the opposite (zero rates, falling productive demos, deglobalization) and it was all started with a pandemic and broken supply chains.

The best description I can give is that keeping businesses and consumers solvent/spending during the pandemic (note that was actual spending not QE) did ALLOW prices to rise rather than causing massive demand destruction (and likely depression-deflation). Inflation at least allows those decades of debts to be repaid and might lower risk.

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

#268

Post by rcme »

candiodari wrote: post #201
rcme wrote: post #162

Earlier quoted context omitted.

Demand for milk and eggs is definitely elastic. And we're seeing inflation in other goods that aren't staples as well.

Not at the price points they're at. If milk halved in price, would milk consumption significantly rise? Not at all. So yes, milk consumption is price elastic, but not at these prices. They're too low. Same goes for eggs, bread, ...

I could definitely see milk consumption increasing if prices were lower. Tons of products use cheap fats that could use butter instead if it were cheaper. If milk products were cheap enough, you could use it as animal feed. If it was really cheap you could burn it for energy. Also worth noting is that the dairy industry is subsidized by the government, so the amount of milk being consumed is already higher than you would expect if the price was set at the market price.

For eggs, similar things could occur. Soy lecithin is a common emulsifier, but could be replaced by egg lecithin if eggs were cheaper than soy.

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

#269

Post by naasking »

gruez wrote: post #264
naasking wrote: post #242

Earlier quoted context omitted.

> If there is 1000 units of something but demand for 5000 units, Except that's not the case here, both supply and demand for eggs and milk have not changed much, neither have the costs to produce either. That's why prices are skyrocketing and profits are soaring. Look, the data is out there and very clear on this point: https://www.youtube.com/watch?v=udITRL9-t08

>both supply and demand for eggs [...] have not changed much https://en.wikipedia.org/wiki/Avian_influenza#United_States_...

Yes, they euthanized a bunch of chickens, and yet total egg output remained basically the same. So where did the inflation come from? Why are egg producers suddenly recording record profits?

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

#270

Post by Aunche »

js8 wrote: post #165
Aunche wrote: post #115

Earlier quoted context omitted.

>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…

Not true, you can also (selectively) increase taxes to take out excessive money supply. In the case of profit-driven inflation, you could tax excess profits.

In theory, this could be deflationary, but there are a few reasons this probably wouldn't be effective.

- It usually takes at least a year before tax changes are proposed before they take effect

- They are always accompanied by spending increases that neutralize any potential deflationary effects

- You actually can't actually increase taxes that much. For example, the US Fed has quantitatively tightened roughly $600 billion in the past 6 months. The Biden corporate tax increases are estimated to bring in $50 billion, and windfall tax proposals also tend to hover around that order of magnitude.

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