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

#241

Post by vinyl7 » Sat, Feb 25, 2023, 12:49 PM UTC

landswipe wrote: post #214

hgomersall wrote: post #176

Earlier quoted context omitted.

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.

I think it's going to be worse. Boomers think their house is worth million dollars today, but in 5-10 years when more of them start to retire, they will find out that a) millenials and younger can't afford their inflated prices and b) there are no other boomers to trade houses with. So if they rely on their house to be a retirement fund....that might not exist when they actually retire.

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

#242

Post by naasking » Sat, Feb 25, 2023, 12:56 PM UTC

monero-xmr wrote: post #171

naasking wrote: post #156

Earlier quoted context omitted.

> 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.

> 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

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

#243

Post by roenxi » Sat, Feb 25, 2023, 12:57 PM UTC

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…

> ... even if competition does assert itself eventually it is slow ...

This analysis is not accounting for the risk that businesses face in the current environment. Australia has recently put a lot of pressure on small businesses. I still see empty store fronts every day. It is likely competition is slow because all the people who could compete are weighing up the odds of their business being shut down and not liking their chances.

In fact, the idea that inflation is being 'driven' by profits is foolish. Profits are a result of market conditions - inflation was caused by mass disruption of the economy combined with money printing. The people who benefited the most from that were big businesses but they weren't in the driver's seat for what was going on.

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

#244

Post by naasking » Sat, Feb 25, 2023, 12:59 PM UTC

Khaine wrote: post #158

naasking wrote: post #156

Earlier quoted context omitted.

> 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…

That's what markets do, they co-ordinate supply and demand. If you can't raise prices to ease demand, what do you do? That extra money they are making, is then used to invest in more planes, and crew to staff more flights to serve more customers/ You can't have capitalism, without both sides of that coin. That's how markets work.

> That extra money they are making, is then used to invest in more planes

No, they're spent on stock buybacks to enrich shareholders, instead of invested back into their workforce or expanding capacity:

https://www.youtube.com/watch?v=udITRL9-t08

I don't know why people keep believing in this myth, this reinvestment only happens when there's sufficient competition and no coordination, which is not the world we live in.

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

#245

Post by jackmott » Sat, Feb 25, 2023, 1:04 PM UTC

jvmfjvfjvf wrote: post #229

brnt wrote: post #170

Earlier quoted context omitted.

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…

Do you make the same claim about climate science?

[dead]

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

#246

Post by naasking » Sat, Feb 25, 2023, 1:06 PM UTC

Aunche wrote: post #167

naasking wrote: post #151

Earlier quoted context omitted.

> 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 overall inflation much, if at all. The necessity of rationing assumes that demand is outstripping supply. That's not the case when corporations are price gouging. Egg farms are not se…

> Again, egg farmers are not going to suddenly just kill all of their chickens and switch to building datacenters because we only implemented price controls on necessities like food. Nixon's price controls went fine, as but one example. Funny you say that... > Ranchers stopped shipping their cattle to the market, farmers drowned their chickens, and consumers emptied the shelves of supermarkets. https://www.pbs.org/wg…

Notice how the first round of price controls went just fine though. Like interest rates, price controls are not a hammer to apply indiscriminately. You have to apply them judiciously and for short periods. Unlike interest rates, at least they don't depress the whole economy, lead to recessions and disproportionately harm the poor.

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

#247

Post by naveen99 » Sat, Feb 25, 2023, 1:10 PM 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…

Could balance the budget. If you accidentally run a surplus just refund as tax credit.

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

#248

Post by BLKNSLVR » Sat, Feb 25, 2023, 1:27 PM UTC

firecall wrote: post #36

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…

All very good points! We've had wage stagnation for ~15 years. I've long wondered what it is about our job market that keeps wages down whilst company profits continue to grow. Perhaps an unspoken collusion around wages, or maybe lack of salary growth in government jobs that in turn pushes the private sector. Lack of competition and choices is another issue, as is Australia's dispersion of cities. It's not straight f…

Only anecdotal, but a friend of mine in Adelaide is having his rent increased 30% as of April.

Thirty percent!

Understandably he's looking to move and buy because fuck being beholden to that kind of bullshit ever.

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

#249

Post by makomk » Sat, Feb 25, 2023, 1:29 PM UTC

wizofaus wrote: post #217

drekipus wrote: post #203

Earlier quoted context omitted.

That doesn't take money out from supply

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

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 of money whilst disincentivizing companies from trying to expand production. In order to use tax to take out excessive money supply, that tax needs to come out of the pockets of ordinary workers and consumers who'd otherwise spend the money buying stuff, either through an increase in income tax or sales tax/VAT. Usually I think income tax would be used. This is incredibly politically unpopular and an election-loser since people see that the government is taking their money whilst they can't afford stuff and some corporations are making big profits.

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

#250

Post by kasey_junk » Sat, Feb 25, 2023, 1:40 PM UTC

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.

Taxes are one of these mechanisms. It’s just political suicide to vary the tax rate like this.