Analysis finds Australia’s inflation being driven by company profits, not wages • Hacker News Board

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

#211

Post by landswipe » Sat, Feb 25, 2023, 11:06 AM UTC

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…

Some people are also suggesting progressively decreasing the capital gains discount on property, to force the housing prices down over time and address supply issues.

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

#212

Post by rightbyte » Sat, Feb 25, 2023, 11:08 AM UTC

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…

> There are only 3 ways to decrease inflation: ... - Interest rates ...

Why is this taken as a fact? You hand out money to people with money. It is a zero sum game.

The reason you need to increase rates with inflation is to make it viable to sit on the currency. Otherwise you need to sell it as fast as possible to avoid inflation.

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

#213

Post by lordnacho » Sat, Feb 25, 2023, 11:09 AM UTC

brnt wrote: post #170

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…

What makes economics a weak science, weaker than many other humanities, is the habitual absence of experimental evidence. It's of course hard to have a number of double blind histories of the world economy, yet that is what it takes to be a hard science. If you accept that it never can be (many economists try hard to pretend otherwise!), then you have to accept (again, many don't) that building mathematical models fo…

We do get observational evidence, the only problem is it tells us the opposite of what we thought, eg minimum wage evidence contradicts what theory would say.

Somehow this doesn't seem to matter though, we still teach the theory.

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

#214

Post by landswipe » Sat, Feb 25, 2023, 11:09 AM UTC

hgomersall wrote: post #176

SamPatt wrote: post #168

Earlier quoted context omitted.

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 compe…

Australia's problem is inflated property prices, it's money being generated out of the air. This is a disaster for renters and is creating disparity. Boomers and older gen X are or will be cashed up to their eyeballs after offloading one or two investment properties, this has happened over the last few years.

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

#215

Post by Nursie » Sat, Feb 25, 2023, 11:11 AM UTC

refurb wrote: post #189

Nursie wrote: post #159

Earlier quoted context omitted.

Yeah nah, there’s that alt economics we were talking about. There are multiple causes, money supply is only one of the factors at play. Using your fire example, there are three factors, miss any one of them, no fire. Choosing then to blame a single factor is … well it’s just wrong. And that’s if we grant your fire analogy as valid in the first place. Regardless of the above - conflating monetary supply inflation with…

Ok, please suggest how else you can get inflation (sustained, across the board price increases, i.e. devaluation of money) without an increase in money supply (either through new money or increased debt). You claim its wrong but offered no explanation.

In the abstract, sustained demand but with a drop in supply of goods, will produce price inflation with no particular need to change the money supply.

This is what we have seen with (for example) gas and oil in the wake of the russia-ukraine conflict.

I claim, as I have always claimed, that monetary supply is only a single variable in the calculation, not the be-all and end-all. The idea that it is the only factor (not the only important factor but the only factor) is a tenet of the religious pseudo-economics of the "Austrian School". Not that economics is the most rigorous of sciences in the first place, but Austrian economics is more akin to a moral code and set of beliefs.

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

#216

Post by landswipe » Sat, Feb 25, 2023, 11:16 AM UTC

Khaine wrote: post #187

tallytarik wrote: post #186

Earlier quoted context omitted.

Can you explain how you arrived at that conclusion?

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…

'Employers', but I agree. The thing is, rental inflation is going to cause the property market to go pop... You can see it a mile away.

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

#217

Post by wizofaus » Sat, Feb 25, 2023, 11:19 AM UTC

drekipus wrote: post #203

js8 wrote: post #165

Earlier quoted context omitted.

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.

That doesn't take money out from supply

Presumably it effectively does if the extra cash raised isn't spent.

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

#218

Post by landswipe » Sat, Feb 25, 2023, 11:19 AM UTC

rightbyte wrote: post #10

I can't believe how people buy this "wage driven inflation" thing. The asset owner have had insane gain due to X, mostly money printing I guess, and when wages start to increase it is a problem? Workers are just balancing out supply and demand ... Inflation is not driven by "company profits" either most likely. It just looks that way when wages are getting a smaller share of the inflation nominal gains than company p…

Either way, it's going to make Australia less desirable and a lot of people are going to suffer. The economy works in mysterious ways :)

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

#219

Post by CraigJPerry » Sat, Feb 25, 2023, 11:20 AM UTC

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…

>> There are only 3 ways to decrease inflation

No expression of confidence intervals, no need for error bars on this statement? As repeatable as gravity?

If we were to honestly restate the above with reference to uncertainty, we’d struggle just to get past the idea that inflation is measurable in any accurate way, never mind that it can be deliberately influenced so easily.

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

#220

Post by SturgeonsLaw » Sat, Feb 25, 2023, 11:22 AM UTC

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…

Qantas is particularly scummy. They received over $2B in taxpayer money in bailouts and other concessions, stood down thousands of employees and did a $500M stock buyback.