Is there an alternate link to the article? I cant seem to get the guardian to loaf and i want to see if they made the very basic mistake of missing that Australia is largely a resource producing country so inflation in resources prices would drive profits and inflation but would not mean inflation is driven by corporate profits.
Analysis finds Australia’s inflation being driven by company profits, not wages
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Re: Analysis finds Australia’s inflation being driven by company profits, not wages
#282Earlier quoted context omitted.
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…
Even in an ideal world where there's no fundamental difference in the cost of producing 1000 units or 5000, companies aren't going to be able to sell 5000 at the same price as they could 1000 when doing so exceeds their current capacity. Expanding that capacity means more staff and equipment, which costs money that has to be paid for somehow. It also takes time, which means that it cannot act as an immediate solution…
I personally think airline tickets need to be taxed heavily so that travelers pay for every ounce of carbon emitted to be captured.
Re: Analysis finds Australia’s inflation being driven by company profits, not wages
#283Earlier quoted context omitted.
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.
I didn't suggest government should dictate production levels or prices.
I am suggesting governments should consider putting together not-for-profit, but self funding organizations, with fair and reasonable salaries for all employees, to produce good and services for its people.
Then you allow the free market to compete against that baseline profitable business.
If for profit companies can't produce a better or cheaper product, they should just not exist.
Australia's ABC is a good example of what I am talking about. There are commercial offerings, but there is a baseline keeping standards up.
Of course gets a lot more complicated when your state sponsored factories can't compete on quality or price and is not selling any widgets at all. At what point do you decide the market is working to your satisfaction and you should shut it down.
How much of a loss do you allow? How much is it worth to a country to be able to build x widgets or offer x service?
How good would it be if we still had the ability to manufacture things here in Australia? How do you put a dollar value on that?
Re: Analysis finds Australia’s inflation being driven by company profits, not wages
#284Every company I work with is trying to make up for profit lost over the covid years. Surprise surprise company after company are now posting record profits.
As opposed to what, them normally not trying to increase profits? Had the pandemic not happened, would we expect CEOs to be like "meh, the last few years were pretty good so I'm not going to try too hard to make more money"?
>As opposed to what, them normally not trying to increase profits?
I didn't imply or state that: strawman.
>Had the pandemic not happened, would we expect CEOs to be like "meh, the last few years were pretty good so I'm not going to try too hard to make more money"?
More of the same.
If you're interested in posting a serious reply/question to my input about the consequences of trying to meet revenue targets, I'm more than happy to continue the discourse.
If you're just looking for opportunities to spout your nonsense, don't expect a reply.
Re: Analysis finds Australia’s inflation being driven by company profits, not wages
#285Earlier quoted context omitted.
The general goal of all the windfall taxes I've seen proposed is precisely that the money used goes back to ordinary people so it can be spent instead of supposedly being wasted sitting around in the bank accounts of the super-rich. This does not, of course, actually help with the underlying problem that there is too much money chasing too few goods and services - it has the opposite effect by increasing the amount o…
Why would giving ordinary people disincentivize companies from expanding production? Quite the opposite, people now have extra money to spent, so they should get the loans going for investment expansion! The last sentence is exactly why you need to tax the big owners and corporations and not the workers, because they control most of the additional money supply in the profit-driven inflation. (That being said, and as…
I assume GP meant the act of imposing windfall taxes - if you know for certain that x% of your profits will be eaten up in taxes, but you can only make some sort of rough guess at how much more demand there might be as a result of cash handouts etc., there's probably not a great motivation to expand production.
Re: Analysis finds Australia’s inflation being driven by company profits, not wages
#286Earlier quoted context omitted.
Rent rises are more the result of extremely low rental vacancies in Australia
Yes, but not totally. If I own an investment property, then I'm going to want a return on that investment. I want the rent payments to cover the mortgage, and to see capital growth over time. When you don't get decent returns on your property investment, you'll just move your investment elsewhere. However with a lack of diverse investment opportunities, housing is a decent play that people understand. So even if retu…
It makes perfect sense in a market like Australia.
If you are making 15% appreciation YoY, your mortgage raises are covered and then some by that increase. If you do not have the liquidity to cover those raises, then get out of the market for someone who does. What you are describing is passing all the risk of your investment onto another party to take advantage of the entire profit.
We do, in fact, understand ALL of the policy implications here. It seems like you don’t. The housing market should exist to PRIMARILY provide housing. Any effects such as you being able to cover your margin by passing on your increase to a tenant is a secondary benefit and should be curtailed to meet the primary need of the economy.
Investments should have risks to make economic sense. In Australia, property owners have mostly been buffered from those risks. Economically, the question needs to be asked as to what value investors provide to the market? The current property investor class is for all intents a purposes a vehicle designed to remove money from the pockets of poor people and put it in the pockets of upper middle class people. Most landlords take bonds to fund improvements to their houses after a fingerprint is found on the wall or the concept of “reasonable wear” is not accounted for, they pass on almost all of the costs, and when a person asks for help with a problem they get ignored indefinitely.
You would make similar money in the stock market but you are taking advantage of broken system that enriches people already in the system. Mortgages give access to houses because they are necessary. People now take mortgages and use them as a margin loan to fund speculation and investments.
The policy answer is to stop allowing investors to access all of the benefits that have not been designed for them. Fixing the John Howard era middle class welfare rorts would begin to fix the problems.
Re: Analysis finds Australia’s inflation being driven by company profits, not wages
#287Is there an alternate link to the article? I cant seem to get the guardian to loaf and i want to see if they made the very basic mistake of missing that Australia is largely a resource producing country so inflation in resources prices would drive profits and inflation but would not mean inflation is driven by corporate profits.
Now I'm trying to imagine what it looks like when a website loafs.
Anyway an archive might work better: https://archive.ph/JID5W
Re: Analysis finds Australia’s inflation being driven by company profits, not wages
#288Earlier quoted context omitted.
It’s not oil shocks because the timing doesnt work out. Like inflation this time started before the Ukraine War and run up in oil prices. Same in the 70’s, inflation had already doubled by 1970 but the oil shock didnt happen until 1973. You could argue it makes inflation worse , but it wasnt the cause.
That implies there is a single factor that “causes” inflation. That’s not true. There are always inflationary and deflationary impacts on prices. Oil and boomers leaving the workforce and covid derailing shipping and monetary policy and 1000 other things can all be pushing up prices at the same time.
But prices going up alone is not inflation.
“Inflation is a general increase in prices and fall in the purchasing value of money.”
The key is general. Increases in prices of select items due to supply or demand is not inflation.
Re: Analysis finds Australia’s inflation being driven by company profits, not wages
#289Earlier quoted context omitted.
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.
Before you describe something as a "fringe theory", you might want to check whether it is taught by major textbooks in the field.
(In this case, try reading https://www.macmillanlearning.com/college/us/product/Macroec... )
Re: Analysis finds Australia’s inflation being driven by company profits, not wages
#290Earlier quoted context omitted.
Why would giving ordinary people disincentivize companies from expanding production? Quite the opposite, people now have extra money to spent, so they should get the loans going for investment expansion! The last sentence is exactly why you need to tax the big owners and corporations and not the workers, because they control most of the additional money supply in the profit-driven inflation. (That being said, and as…
I assume GP meant the act of imposing windfall taxes - if you know for certain that x% of your profits will be eaten up in taxes, but you can only make some sort of rough guess at how much more demand there might be as a result of cash handouts etc., there's probably not a great motivation to expand production.
Isn't that just restating a (probably) truism that investment into financial bubbles tends to be easier than expanding real production?
Where does the extra profit go (in the absence of windfall tax)? I doubt it goes to expanding production, because without windfall tax, you won't see demand change (and, btw, with windfall tax you don't have to estimate, you will directly see customers having more money to spend). So it will go into stock buybacks, real estate and other ways to inflate asset bubbles. These are seemingly easier ways to park money than to make actual real investment decision of expanding certain production.