Surprising no one, it turns out it is actually big business pushing up prices for record profits that is driving the cost-of-living crisis, according to new research.
Every time the economy weakens, working Australians are told to tighten their purse strings, cut back on luxuries and, if they aren’t getting paid enough, just find a better job. But is it wages causing the current crisis? Instead of wages, we need to be looking at mega corporate profits.
Using new research from the Centre for Future Work, we now know that corporate profiteering – driving up costs to maximise profits – has played a major role in Australia’s current inflation crisis, not wage increases or pay rises.
According to the research, the Reserve Bank of Australia’s nine consecutive interest rate increases are based on an appallingly incorrect premise.
The big business sector is enjoying the fruits of the current cost-of-living crisis, in the hundreds of billions of dollars. Meanwhile working Australians, as usual, are being told that it’s their excessive spending and demands for decent, liveable wages that are the cause of this crisis; as though they are the greedy ones.
In fact, big corporations (including the banks and lenders who are earning these extra interest payments) have been making massive profits at the expense of everyday Australians and the economy.
Our exorbitant utility bills are a direct result of the mining and resources sector gouging prices during a harsh, long winter and scorching summer.
The supermarkets took advantage of the temporary supply chain issues caused by COVID and the Ukraine war by raising prices far beyond the amount necessary to cover their extra costs.
What is the result?
Woolworths recently reported 25 percent growth in profits, and Coles’ profits grew 11 percent. The supermarket giants are also taking advantage of consumers’ inability to afford to eat out and are choosing to cook at home instead. The cruel truth is, consumers can barely afford to eat, full stop.
In the first half of this financial year, Australian bank Commbank recorded a massive $5.15 billion profit, which it achieved because of the interest rates increased by the RBA. The result is tens of thousands of homeowners and renters facing mortgage stress and unaffordable rents.
This is what economist Dr Jim Stanford calls, “the desperation of consumers.” What does this mean? Simply, that corporations have been increasing prices – without reducing their profits – for the basic goods and services that we require to survive.
The RBA Governor Phillip Lowe has warned against a potential 1970s-style wage-price spiral; the theory (added emphasis because it is just one of many such theories) that inflation is caused by higher wages causing higher prices, which cause even higher wages.
This economic theory is wrong when you look at two very important factors:
- Corporate profits account for 69 per cent of additional inflation above the RBA’s target rate of 2.5 per cent. Meanwhile, labour costs (this includes wages) only account for 18 per cent.
- Working Australians’ real wages fell by 4.5 per cent in 2022.
As ACTU Secretary Sally McManus says, “Wage growth is clearly not contributing to inflation. Any wage rises in 2022 and early 2023 have been eaten up by price rises and interest rate rises. More needs to be done to get wages moving. The RBA was predicting much higher wage growth, and once again they’ve got it wrong. Not only is their thinking stuck in the 1970s, they’re basing interest rate decisions on flawed projections.”
It’s time to get wages moving, Australia needs a pay rise.
There is some hope though. Looking for real action you can take to boost your wages? Join your union.
Recent ABS statistics show that union members are paid on average $312 more a week than non-union members. In our current economic climate where we’re being squeezed for every dollar we have, this is nothing to sneeze at.
Plus, with every new member our movement grows stronger, taking us one step closer to holding greedy corporations to account, and ensuring that working people are treated with fairness and respect.