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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

#231

Post by lordnacho »

jvmfjvfjvf wrote: post #227
imtringued wrote: post #226

Earlier quoted context omitted.

It is actually very easy to build a theory that disproves the idea of minimumg wage affecting employment. If we assume the economy is already in perfect equilibrium then raising the minimum wage will cause inflation but the wages will adjust upwards with the same coefficient vs the minimum wage. Another factor is that if you give money to people who haven't met their basic needs yet is that they will spend their mone…

A $50 minimum wage wouldn't affect unemployment? Why not make it $100?

If it works at $100, why not?

As long as you're clear about what tradeoffs you're making, and as a society we still want no employment effect, if it works at $100, what's the problem?

You only have something to discuss if it's clear that unemployment will rise, and even so you need to decide how much is tolerable in exchange for whatever you get out of raising the minimum wage.

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

#232

Post by refurb »

Nursie wrote: post #215
refurb wrote: post #189

Earlier quoted context omitted.

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 (n…

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.

Thats not inflation in the sense that economists care about inflation, that’s a price change due to supply and demand, and a subsequent impact on cost inputs dependent on it.

Housing is a good example. Supply takes time and if demand goes up, prices rise, but thats not inflation.

If the only factory producing widgets blows up and the price goes up (and the price of everything else dependent on it) the value of the currency isn't eroded at all. As proven by the fact that the cost of goods unrelated to widgets is unchanged.

Its funny you call monetary theory “pseudo-economics”, yet dont seem to understand some of the basics of economics yourself.

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

#233

Post by imtringued »

marcosdumay wrote: post #88
phkahler wrote: post #70

Earlier quoted context omitted.

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.

Hum... They all seem to say "stickiness" instead, what means the same thing. Modern macroeconomics is all about it, or, well, at least the mainstream macroeconomics is all about it.

What irritates me so much is that all of these things are bolted on afterthoughts. People point at their "beautiful" perfectly liquid models and then when you tell them the real world is "ugly" and illiquid they get angry and tell you, you are wrong.

I mean the most classic example is the theoretical barter economy that doesn't exist because you need money to lower transaction costs for a high degree of the division of labor (which isn't disputed). The reason for that is that economists came up with this theoretical model and the text books want to teach barter first and then money which gives the wrong impression that barter economies actually existed. No, people either managed the economy the way we manage it internally within families and corporations or they straight up used a commodity as their money or some hard to forge symbol like precious metals. There is not much in-between because barter is inconvenient as hell and it causes social difficulties because the fairness of trades has to be evaluated very carefully, opening up the potential for conflict.

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

#234

Post by tallytarik »

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…

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 is the cause of all of Australia’s problems)

I don’t say that as a means to ignore the argument, rather I think we’re all better when we can recognise biases - internal and external.

According to [2], the rental crisis has been caused by many factors predominantly related to the pandemic rather than immigration.

> People don't dare say reduce immigration because then you get called racist.

I don’t think an argument should be dismissed on that basis, either! But surely you accept that some who advocate for reducing immigration do so simply because they are racist.

Some may avoid the suggestion because they recognise that immigration is longstanding policy and perhaps a defining feature of our country.

Some may see that other countries who are less welcoming of migrants are indeed having the same wage/inflation/property problems.

So it is possible that some do not reject your argument because they think you are racist but because the argument is not convincing.

[1] https://insidestory.org.au/does-immigration-mean-lower-wages...

[2] https://www.ahuri.edu.au/research/brief/why-does-australia-h...

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

#235

Post by refurb »

imtringued wrote: post #230
refurb wrote: post #190

Earlier quoted context omitted.

Thats a terrible article. The example of oranges going up in price and apples down is not inflation. Inflation is an overall erosion of buying power. When oil prices rise that’s not inflation, although prices might rise.

But we don't have neat measurements that differentiate between supply side and demand side inflation. Honestly the 70s inflation and the 20s inflation were both caused by the same thing, supply side price shocks in oil prices.

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.

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

#236

Post by sumedh »

tallytarik wrote: post #186
Khaine wrote: post #108

Earlier quoted context omitted.

Immigration is keeping wages down, and continues to do so. It is also putting immense pressure on the rental market. Want to improve the lives of ordinary Australians? Reduce immigration levels.

Can you explain how you arrived at that conclusion?

When there was no immigration during Covid salaries from people rose because employees could easily get a higher salary job so the employers were forced to increase salaries.

Now that immigration is open employers will offer less salary compared to the market but a fresh of the plane immigrant will still end taking that job because his/hers first priority is getting a job and they dont fully know what the market rate is.

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

#237

Post by Nursie »

refurb wrote: post #232
Nursie wrote: post #215

Earlier quoted context omitted.

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 (n…

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. Thats not inflation in the sense that economists care about inflation, that’s a price change due to supply and demand, and a subsequent impact on cost inputs dependent on it. Housing is a good example. Supply takes time and if demand goes up, prices rise, but thats not…

> If the only factory producing widgets blows up and the price goes up (and the price of everything else dependent on it) the value of the currency isn't eroded at all. As proven by the fact that the cost of goods unrelated to widgets is unchanged.

But if it happens across an economy due to, for instance, a rise in the input costs of fossil fuel which plays out across multiple sectors, this can push prices up across the board without needing the money supply to change at all.

> Its funny you call monetary theory “pseudo-economics”

I did nothing of the sort, monetary theory and Austrian economics are not synonymous. Once again, money supply is not the only factor in inflation, this is a very mainstream economic view.

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

#238

Post by okr »

imtringued wrote: post #228
stephen_g wrote: post #125

Earlier quoted context omitted.

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…

The problem with monetary policy is that there is no way to actually decrease the money supply, other than repaying debt. If there was literally any other mechanism to get rid of excess money, then you could, for example, do helicopter money when there is a recession and do the inverse of helicopter money when there is a boom and never even touch the interest rate.

Does that mean, someone would add or take money from anyones bank account? And you can't do anything about it?

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

#239

Post by tallytarik »

sumedh wrote: post #236
tallytarik wrote: post #186

Earlier quoted context omitted.

Can you explain how you arrived at that conclusion?

When there was no immigration during Covid salaries from people rose because employees could easily get a higher salary job so the employers were forced to increase salaries. Now that immigration is open employers will offer less salary compared to the market but a fresh of the plane immigrant will still end taking that job because his/hers first priority is getting a job and they dont fully know what the market rate…

> When there was no immigration during Covid salaries from people rose

Source? I’m not aware wages on average increased during the pandemic.

To the rest of your comment, it seems to be incorrect: https://insidestory.org.au/does-immigration-mean-lower-wages...

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

#240

Post by refurb »

Nursie wrote: post #237
refurb wrote: post #232

Earlier quoted context omitted.

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. Thats not inflation in the sense that economists care about inflation, that’s a price change due to supply and demand, and a subsequent impact on cost inputs dependent on it. Housing is a good example. Supply takes time and if demand goes up, prices rise, but thats not…

> If the only factory producing widgets blows up and the price goes up (and the price of everything else dependent on it) the value of the currency isn't eroded at all. As proven by the fact that the cost of goods unrelated to widgets is unchanged. But if it happens across an economy due to, for instance, a rise in the input costs of fossil fuel which plays out across multiple sectors, this can push prices up across…

Yes, prices can rise broadly due to oil prices rising, but they come back down when oil prices drop.

And the price rise isn't because the currency is less valuable, so its not the type of inflation that concerns economists - the kind that drives consumers to spend rather than save or invest.

Just like the converse - if energy costs dropped due some new technology, it’s not deflationary (each dollar is worth more than before).

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