After a brief flirtation with acknowledging that businesses lifting prices above inflation is adding to inflationary pressure — purely accidentally of course, nothing to do with profits — Reserve Bank of Australia (RBA) governor Philip Lowe has retreated back into full-scale denialism about the central role of profit-gouging in inflation.
In a speech yesterday that drew extensive coverage for Lowe’s announced changes to the RBA board meeting schedule, he also touched on the bank’s thinking about inflation and the likelihood of further rate rises. What is worrying them? “There are ongoing pricing pressures from several factors, including: the high level of capacity utilisation; strong growth in unit labour costs (mainly because of weak productivity growth); a big pick-up in rents; and higher prices for electricity.”
No mention of profit-gouging, which has driven more than half of Australia’s inflation since late 2021, according to the OECD.
During the Q&A following his speech, Lowe was quizzed directly about the role of profits. His response: “The aggregate data show that the profits share excluding the resources sector, which is appropriate to treat them differently, the share has not risen in Australia. What we have seen is firms be able to increase their prices in line with the higher input costs. Being able to pass on input costs fully and preserve the profit margins, but the profit margins have not blown out.”
Remember those profit margins are built on a decade of wage stagnation. Their mere preservation further disadvantages workers who are now suffering large real wage falls.
And according to the minutes from the RBA’s June board meeting, “members observed that some firms were indexing their prices, either implicitly or directly, to past inflation”. That is, not in line with current higher input costs, as Lowe claims, but past levels of inflation.
So which is it, Phil? Are the board members wrong, or are you?
As for what we might call “The Lowe Manoeuvre” — insisting you need to exclude profit-gouging by energy companies in any examination of profit-gouging — as Crikey noted recently, there’s a long list of sectors in addition to energy where there’s evidence of blatant profit-gouging.
Perhaps that’s what Lowe meant when he admitted that well, yes, there had been some profit margin increases, but “by and large, they are confined to specific areas of the economy”.
Specific areas like groceries, energy, construction materials, sea freight, air travel and department stores. Just a few fringe areas that don’t affect consumers much.
By and large.
The end of this joker’s term as governor can’t come soon enough.
Will you be glad to see the back of Philip Lowe? Let us know by writing to letters@crikey.com.au. Please include your full name to be considered for publication. We reserve the right to edit for length and clarity.
It’s unfair to call a serious professional such as Phillip Lowe a joker. Lowe is doing exactly what he is paid to do – excusing corporations for exploiting consumers. If Lowe were replaced by another person with the same ualifications to perform the same job description, we could hope for more of the same.
The actual joke is the institution.
The RBA exists as a veneer for corporations to hide behind.
Corporations exist as a veneer for greedy people to hide behind.
That’s no joke.
If he wasn’t a banker in the 21st century he’d be a priest in the Middle Ages.
or a witch hunter
asking self perpetuating questions
An Inquisitor perhaps determined to stamp out heresy and heretics such as Mr Keane
Why not a present day priest ? All of them are stamped from from the same mold – cause the problem, blame their victims and exploit them.
Herein lies the issue: “Being able to pass on input costs fully and preserve the profit margins, but the profit margins have not blown out.”
So companies are maintaining profit margins while the rest of us go backwards. In other words, Lowe is saying it’s fine to preserve shareholder returns from these companies while the rest of us struggle with mortgage repayments, rents, food, fuel, elec prices etc etc going through the roof.
Here’s the puzzle – profits are up big time yet returns (specifically my super on two continents) are flat / stagnant and have been since early 2022. It doesn’t make any sense. Who is pocketing all this profit?
Just do a check on the competition – getting seats at a limited ticketed events via the big four lobby class middle men ; check out the multinational – dumb Aussies is their narrative – And guess what ” We Need skilled workers” -and guess corporate charities can hire third party companies , pay em corporate salaries to those at the top but mostly hire “volunteers” ( seen the ads? When in fact these ” charities” will report those who dont get to be abused for gratis – Labor and Liberal following Lowe making us more productive but not paying those who are producers ; instead profiting those generators of indenturement and data theft
Maybe enough of those affected by the pirate class should constitute a company and claim our prior interest over these takeovers ? How in the hell did 2 parking consortiums buy up all the public parking and send the resulting profits from our assets off shore ; and not even in a “competitive free tradey sort of way; like the other sell offs of our country done like a cartel carte blanche – using the Neo Liberal catching fish in a barrel failing competitive practice 101
Perhaps a better label would be a jerker ?
I think it was The Australia Institute that said the current inflation is caused by price gouging and the only solution was price control. I think they were right but who has the nous to do it?
Imagine that? A cap on rents, a control on price hikes, and accountability for corporations putting the profits into an overseas tax haven. It has to be socialism. Shush, children! The FIN is prowling outside the gate.
when did that describe socialism it is fair good government and we are being scammed
The French government has put price caps on essential items, probably because the French citizenry gets a bit testy and causes a ruckus when things smell a bit corrupt.
That throwing cobblestones and burning cars tradition is to be applauded. We’re far too polite …
Fun Fact – the long &hallowed French tradition of winkling up the cobblestones ended after the Événements of 68.
De Gaule made it a priority, with lavish funding, for the Parisian authorities to cover in asphalt all the old streets paved with those extremely useful, handily shaped and nicely aerodynamic missiles.
The streets of Paris were widened in the nineteenth century to make it harder for the populace to put up barricades against the authorities.
We are becoming the US – look at corporate pirates at tge BBC now they are fugjjj the ABC ? Netflix programmer — earth to labor get Ita & those awful blokes out of OUR free national cultural broadcaster – corporate raiders get out
what is the diffculty from an increasing Neo liberal Labor – doing damage but whistling dixie
Preach. It just shows how much in the “real world” the people that make these decision really live.
Look guys and girls, there is only price gouging with supermarkets, electricity and rents ok. What are you so worried about…
The old stalwart: inflation in the things you need, deflation in the things you want.
Mr Lowe is doing what he can within the role of the reserve bank and the available tools. The fact that the government is doing nothing to help makes him look bad. There is so much money available to many people that they can and do pay excesses for holidays, concert tickets and luxuries. tThe government thinks the rich need further tax cut in the near future to help them to further inflation. CEOs of top companies who earn large salaries and perks by using dodgy practices are given a pat on the wrist and move to another highly paid job instead of going to jail (seems a bit like priests and child abuse). Meanwhile a majority of the population is hurting, as wealth moves upwards, helped by government decisions. Both policical patrties are letting us down BADLY.
Even the despicable British Tories brought in a super profit tax.
I agree with your comments apart from Lowe and the reserve dong what they can ( to help ).
What they’re actually doing as evidenced by the stats, is CAUSING inflation with their endless rate rises. And that they are wrong is shown by the fact that they react to effects that have not yet entered the system, compounding inflation.
“Lowe reverts to blaming workers for inflation”THIS
is why he should be already gone.
Months ago.
And the next guy would do the same. Or lady.
Lowe is the choice of the
previous leader of
{laughing, no policies}@feralguvmnt mob .
dutton mouthings are reflecting his choice of orifice to speak through.