Mortgagees paying for corporate price gouging

Editor

This item by Andreas Bimba embraces material extracted from William Michell’s blogsite [1]. It appears in a Facebook entry by Andreas dated 24 March 2024 [2].

The Reserve Bank of Australia (RBA), the Treasury, Finance department and the current federal government collude to impose fiscal austerity and high interest rate policy upon the Australian people because they claim that is the best way to fight inflation – even when they know that high inflation is not due to excessive consumer demand or excessive wage increases but is actually mainly driven by corporate price gouging and supply disruptions associated with the earlier Covid shutdowns that have now receded and global oil and gas supply disruptions associated with the war in Ukraine and OPEC – which also have now largely receded.

This cabal of robbers and charlatans serve global capital and not the Australian people that pay their salaries. The following are the relevant extracts from reference 1:
“Over the last few years, the RBA has been emphatically denying that price gouging from corporations with significant market power has been driving the movements in the inflation rate. They knew that if they conceded that reality then there would be no justification for the eleven interest rate hikes they have introduced since May 2022. It was obvious that firms were pushing up profit margins – that is, increasing prices beyond the increases in costs. Still, the RBA denied it and claimed that firms were facing wage pressures and excessive demand, which justified the interest rate rises, despite the evidence not being supportive. On 6th February 2024 a new study has found that there is massive price gouging across all sectors of Australian economy by corporations, many of them operating in sectors that were heavily privatised (for example, airlines, electricity, child care, banking). Systematic profit margin push is occurring, and this has been a significant contributor to the persistent inflationary pressures. These findings strip the RBA of any justification for their unconscionable rate rises which have transferred billions of dollars to the financial elites at the expense of low income mortgage holders.

“So, when the research is done, the results are clear – systematic profit pushed through price gouging exists across all the major sectors of the economy.

“It also means that interest rate increases designed to quell excess demand are missing the point entirely and just further hurting the consumers with debt who are already being squeezed by the profit gouging.

“[A recent] report from Allan Fels is humiliating for the RBA which has systematically denied the presence of price gouging in the Australian economy.

“What is clear is that the RBA uses its position to misinform the public by holding itself out as an authority when in fact it has been captured by the financial elites who are profiting significantly from the latest round of interest rate increases.”

Editor’s additional comments:
What makes the above story even worse is the attrition in real purchasing power of nominal wages in Australia. The following also has been extracted from reference1:
“The RBA had been consistently claiming it was witnessing wage pressure which was spilling over into the accelerating price inflation – a claim that the official data could not back up.

“The following graph [figure 1] shows the annual growth in real wages from 2005 to the September-quarter 2023 (latest data).
What we observe over the course of this recent inflationary period is a systematic attrition in the real purchasing power of nominal wages in Australia.

“There is no sign of the ‘saw tooth’ pattern that would signify an element of real wage resistance from workers, where they are able to at least partially reverse the purchasing power attrition with successful wage claims.

“That sort of pattern was prominent in the 1970s inflationary episode, which was drawn out because labour and capital engaged in a distributional battle as to who would bear the real income losses arising from the rises in imported oil prices. No such struggle has been evident in the last few years.

“So any notion that excessive wage demands justified the interest rate hikes since May 2022 cannot be justified by the data. The RBA also claimed that they were pushing up rates because the inflationary pressures reflected excess demand and they had to increase unemployment to choke of the ‘excess’ spending. Once again, it was hard to make this case when examining the official data.”

References:
1. Mitchell, William; “New research report finds massive price gouging across all sectors of Australian economy” https://billmitchell.org/blog/?p=61559 (8 Feb 2024).
2. Bimba, Andreas; “The Reserve Bank of Australia punishes those with mortgages for the price gouging of corporations and lies about it”, FB entry (24 Mar 2024).