The Australian Institute has said that inflationary pressures within the country and the cost of living crisis have been greatly increased by major companies profiteering and pushing prices far higher than they would under normal circumstances.
Australia and much of the world is undergoing a sharp increase in price levels. The most commonly cited reasons for this are the increase in the price of fuel, recovery from the Covid-19 pandemic, and the ongoing Russian invasion of Ukraine.
CEOs in Australia have however warned against pay rises for workers claiming that this will result in a price-wage spiral and increase inflation even further.
Innes Willox, CEO of Australian Industry Group said recently:
"We are now at risk of a wages and inflation and interest rates death spiral. In the current circumstances, there is a clear risk that a high increase in wages without improved workplace productivity would fuel inflation and increase the likelihood of a steeper rise in interest rates to the detriment of growth and job creation."
However, research from the Australia Institute has put the blame on companies, saying:
"Australia isn't experiencing a wage-price spiral, it's at the beginning of a price-profit spiral. The national accounts show it is rising profits, not rising costs, that are driving Australia's inflation."
Australia Institute chief economist Richard Dennis says:
"While companies are arguing that they have 'no choice' but to increase their prices, the fact that they are making record and rising profits is proof of how many choices they really have. It's a shortage of competition, not a shortage of skilled labour, that is driving up the cost of living in Australia. In short, while in the long run firms must set prices sufficient to cover their costs of production, there is no direct link between costs of production and prices beyond the desire of firms to maintain, or increase, their profits."
Adding:
"Given that profits currently account for a record share of GDP, there is simply no truth behind the assertion that the Australian corporate sector has 'no choice' but to pass on cost increases in full in the form of higher prices. Indeed, the rising profit share of GDP suggests that Australian firms have, for some time, been choosing to increase their prices faster than their costs have been rising. By definition this causes higher inflation."
[Based on reporting by: Yahoo]
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