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RBA finally admits role of corporate price hikes in inflation

The Australia Institute 2 mins read

The Reserve Bank of Australia has finally acknowledged that corporate price hikes play a role in Australia’s inflation woes.

The latest meeting of the RBA board noted that "some firms were indexing their prices, either implicitly or directly, to past inflation. These developments created an increased risk that high inflation would be persistent, which would make it more difficult to keep the economy on the narrow path."

Earlier this year the Australia Institute released research that showed that corporate price gouging, and the associated record profits generated by it, were a far more potent driver of Australia's inflation crisis than modestly rising wages. The Australia Institute questioned why the RBA had persistently cited wage growth as a concern, when increases were well beneath the rate of inflation, but had ignored price hikes and profits, when corporations were increasing prices well above the rate of inflation.

"Finally, the Reserve Bank has acknowledged the role of corporate price hikes in inflation," said Greg Jericho, policy director at the Australia Institute's Centre for Future Work.

"Perhaps now the RBA will be inclined to stop punishing everyday Australians and blaming their modest, below-inflation wage rises.

"Companies are the ones that set prices, not workers. The Reserve Bank has finally acknowledged that companies are not merely responding to market forces or increased costs but are increasing prices because they can take advantage of the inflation crisis to increase their margins.

“This is consistent with the OECD’s recent research that found profits were driving inflation not just in Australia but across many advanced economies, as well as earlier Australia Institute research.

"Now, finally the Reserve Bank has itself acknowledged the role companies are playing in keeping inflation high even as the Reserve Bank acknowledges wage growth remains 'consistent with the inflation target',” said Dr Jericho.

Contact details:

Georgie Moore
Horton Advisory
0477 779 928

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