I’m happy to see pressure mounting on the RBA. Not so much even for the decision to lift rates, but on it’s myopic approach to analysis. The economy has changed; it has become more integrated, and duopolies and oligopolies rule the Australian markets. A fundamental lack of competition is allowing the growth of profits, and the RBA currently seems unwilling to accept this as a line of thinking.
Bernard Keane, writing for Crikey, knocks it out of the park on the Reserve Bank of Australia’s approach to inflation.
It’s hard to choose a few highlights from Keane’s article; the entire piece is worthy of reading.
The RBA wants to wish the entire profit-inflation debate away, seemingly enraged at the suggestion that gouging by firms with high levels of market power is a greater spur to inflation than the traditional villain: greedy workers demanding pay rises driving a wage-price spiral.
the OECD weighed into the debate, devoting a section of its latest global economic forecasts to the issue. Its data specifically on Australia shows unit profits massively outweighing unit labour costs as a source of inflation.
this bout of profit-driven inflation comes at the end of a near-decade of wage suppression, and a historic shift — especially since 2017 — from wages to profit share of income nationally. Merely preserving, let alone strengthening, profit margins in a period of high inflation perpetuates that shift from workers to business.
Neoliberals have a blind spot when it comes to market concentration: the core idea that unfettered markets work more efficiently than highly regulated markets means a relative antipathy to effective competition laws designed to protect the very mechanism by which markets work efficiently.