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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

#291

Post by kasey_junk »

refurb wrote: post #288
kasey_junk wrote: post #253

Earlier quoted context omitted.

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.

All general means in that sentence is that the price increasing factors are more prevalent than the price decreasing ones.

If there are several structural issues (eg greatest workforce change in 3 generations, war in Europe, worldwide pandemic, etc) they can all contribute to a general inflationary (or deflationary) trend.

It’s a very particular economic school that says only monetary policy causes inflation. And we have years and years of loose policy that didn’t put inflation on the front burner for economists to argue about.

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

#292

Post by andrekandre »

andrekandre wrote: post #97
gruez wrote: post #56

Earlier quoted context omitted.

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? yea, actually that. i dont think it would be unprecedented if some companies said "hey we are making a healthy profit already, so in order to not harm our customers we'd like to keep prices as they are or reduce them if possible"...

i know your not supposed to talk about ↑ downvotes, but honestly i'd really appreciate someone to share why the massive downvoting of my comment?

what rules/guidelines of hn did i violate here?

i've never had a comment voted so badly before, so i'd really appreciate some feedback....

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

#293

Post by barfingclouds »

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…

Well can’t you observe past behavior with great detail? How would that be soft?

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

#294

Post by refurb »

kasey_junk wrote: post #291
refurb wrote: post #288

Earlier quoted context omitted.

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.

All general means in that sentence is that the price increasing factors are more prevalent than the price decreasing ones. If there are several structural issues (eg greatest workforce change in 3 generations, war in Europe, worldwide pandemic, etc) they can all contribute to a general inflationary (or deflationary) trend. It’s a very particular economic school that says only monetary policy causes inflation. And we…

All general means in that sentence is that the price increasing factors are more prevalent than the price decreasing ones.

It doesn't. Inflation is an erosion of value of the currency.

General means "across the board" because the currency is worth less.

Sure, if there is a glut of apples and the price drops you may not notice the inflation baked into the price, but it's there.

And if there is a shortage of oranges the price may jump higher than inflation, but that doesn't mean inflation is higher.

People seem to be confusing general prices changes due to other factors with inflation. It's not inflation unless the currency is worth less.

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

#295

Post by amitkgupta84 »

This article is based on this paper: https://australiainstitute.org.au/wp-content/uploads/2023/02...

It looks at some recent time period (roughly, during COVID) and breaks down the growth in money spent by where it goes (e.g. company profits, labor, etc.) and how much of it is due to real growth in output vs. being due to purely inflationary price hikes. It aims to show that a disproportionate amount of the excess money spent, beyond that accounted for by real growth, went to company profits.

There are two problems with the approach in this article.

First, its choice of time period is somewhat arbitrary. Over the course of this particular 11 quarter time period (Dec 2019 - Sep 2022), corporate (+38%) and small business (+30%) profits grew much more than labor expenditures (+17%). But just from the data presented, over the final 8 of those 11 quarters, growth in corporate profits (+22%) and labor expenditures (+18%) were comparable, and growth in small business profit (+7%) was much less. This article doesn't present the data, but what would happen if choosing a longer time scale? Quarter over quarter we see business profit growths are very volatile, sometimes growing, sometimes shrinking (negative growth). So unless you're looking at longer time horizons like decades, you can probably find runs of 8-12 quarters showing any narrative you want.

The other problem is how this article tries to determine how much growth in each component was real vs. purely inflationary. The problem is it assumes the real growth of each component was the exact same (about 6.5%). After observing 38% nominal growth in corporate profits and 17% nominal growth in labor expenditures, it simply assumes the real growth in each (due to real growth in output) was the same 6.5% for each of those categories. One implication of this presumption would be that over any time period, the real output growth of corporations and the real output growth of small business would always be the exact same, percentage-wise. This is definitely a completely flawed presumption. And it's doing most of the heavy lifting in the paper's overall argument.

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

#296

Post by sumedh »

tallytarik wrote: post #239
sumedh wrote: post #236

Earlier quoted context omitted.

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...

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

Did you switch jobs during Covid? Talk to your friends and colleagues who switched jobs and then get back to me.

Before you link any random website, you have to figure out what is their agenda. There is lot of propaganda. These so called studies claim that immigration does not hurt wages, then you have to look into who is sponsoring these studies. Lot of times its some industry lobby group who wants to lobby for more immigration to suppress wages funds these studies to get the conclusion they want.

If you trust such studies you should also trust that cigarettes are good for you because cigarette companies paid scientists in the past to conduct studies to show doctors recommend cigarettes.

Don't fall for such propaganda again or try running a business where you have to hire employees.

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

#297

Post by kasey_junk »

refurb wrote: post #294
kasey_junk wrote: post #291

Earlier quoted context omitted.

All general means in that sentence is that the price increasing factors are more prevalent than the price decreasing ones. If there are several structural issues (eg greatest workforce change in 3 generations, war in Europe, worldwide pandemic, etc) they can all contribute to a general inflationary (or deflationary) trend. It’s a very particular economic school that says only monetary policy causes inflation. And we…

All general means in that sentence is that the price increasing factors are more prevalent than the price decreasing ones. It doesn't. Inflation is an erosion of value of the currency . General means "across the board" because the currency is worth less. Sure, if there is a glut of apples and the price drops you may not notice the inflation baked into the price, but it's there. And if there is a shortage of oranges t…

You’re arguing circularly. Currencies are worth less when things cost more. Things cost more when prices increase.

If a central committee increased the price on everything without changing the monetary supply that would still be inflation. Similarly if the invisible hand does it or if there is broad collusion amongst producers.

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

#298

Post by gruez »

jay_kyburz wrote: post #283
gruez wrote: post #265

Earlier quoted context omitted.

>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 cheape…

>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.

What specifically does this entail? Is the government providing starting capital? Or is it in charge of creating the organization and letting them handle the rest?

>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.

According to wikipedia ABC receives more than a billion dollars per year from the government. How can you say with a straight face that companies that can't compete with that "should just not exist"?

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

#299

Post by tallytarik »

sumedh wrote: post #296
tallytarik wrote: post #239

Earlier quoted context omitted.

> 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...

> I’m not aware wages on average increased during the pandemic. Did you switch jobs during Covid? Talk to your friends and colleagues who switched jobs and then get back to me. Before you link any random website, you have to figure out what is their agenda. There is lot of propaganda. These so called studies claim that immigration does not hurt wages, then you have to look into who is sponsoring these studies. Lot of…

> Talk to your friends and colleagues who switched jobs and then get back to me.

They increased their salary!

Did you know that lots of other people didn't change jobs during the pandemic? In fact, some people even lost their jobs! And lots of others kept the same job at the same salary (while inflation increased).

From 14 March to 3 October 2020, for example, the ABS reported that wages were down -3.3% (and would be much lower if you excluded JobKeeper payments)[1].

We're on a tech website, so if you had scoped your comment to "tech workers salaries rose on average", I would probably agree. Do remember that the world doesn't consist entirely of tech workers.

> There is lot of propaganda.

This is certainly true. But given you didn't provide any of your own sources to back up anything you're saying, some might think you're using accusations of "propaganda" as a simple means to disagree with something you don't like.

[1] https://www.aph.gov.au/About_Parliament/Parliamentary_Depart...

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

#300

Post by jay_kyburz »

gruez wrote: post #298
jay_kyburz wrote: post #283

Earlier quoted context omitted.

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 cheape…

>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. What specifically does this entail? Is the government providing starting capital? Or is it in charge of creating the organization and letting them handle the rest? >If for profit companies can't produce a better…

>What specifically does this entail? Is the government providing starting capital? Or is it in charge of creating the organization and letting them handle the rest?

In my imaginary utopia, they are public servants paid salaries and benefits directly.

The government already provides heaps of starting capital for business it wants to get get off the round.

>According to wikipedia ABC receives more than a billion dollars per year from the government. How can you say with a straight face that companies that can't compete with that "should just not exist"?

Every Australian pays just a few cents a day for our ABC, and I can say it with a straight face, because there are profitable commercial channels here in Australia that it directly competes with.

Aussie post is similar, there is a nationalized option, and there is commercial competition. I believe Aussie posts runs a profit as well, ABC is pure expenditure.

I'm not an expert in any of this, just think its fun to muse about when it pops up here on HN.

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