Oh look at that, Greedflation just like TDB argued!
A new report claims rising profits – not wages – were the primary driver of domestic inflation during the cost of living crisis.
Inflation shot up post-COVID-19 to a peak of 7.3 percent in June last year. Since then it has dropped to 6 percent but is still well above the Reserve Bank’s target range of between 1 and 3 percent.
This has pushed the costs of necessities sky high with household costs rising by 16.3 percent since 2021, food increasing by 9.6 percent in the last year and repeated hikes to the official cash rate.
Inflation has been blamed on the war in Ukraine, rising labour costs, supply chain constraints and pandemic spending.
But a report released on Monday by FIRST Union, NZ Council of Trade Unions and Action Station argues corporate greed is the true culprit.
FIRST Union researcher and policy analyst Edward Miller said the report found from mid-2021 to the end of 2022, rising profits contributed to more than half of domestic inflationary pressure compared to less than a third which was linked to labour costs.
Miller said this won’t be news to Kiwis who are struggling to afford basics while watching companies post record profits.
“Many communities that are enduring rising prices while businesses post record profits have reached the same conclusion. They know that they are also on the receiving end of an inflation policy response that disproportionately impacts the poor and vulnerable,” he said.
Oh, look at that, Greedflation generated by Transnational price makers price gouging us…
…thanks under regulated capitalism!
Note who put that out?
The IMF – hardly a card carrying member of the Communist Party!
The lie the right spin is greedy workers demanding more wages is generating inflation when really it is the greedy transnational corporates!
Greedflation? Research finds some brands are hiking prices higher than inflation, faster than others
Inflation may not be the only factor increasing the price of consumer goods, especially devices, new research by PriceSpy suggests.
PriceSpy tracks the cost of goods over time, showing consumers where to get the lowest prices.
Carl Lindholm, head of public relations for PriceSpy Aotearoa, said while inflation is often blamed for increasing prices, it’s not the only reason.
“We are increasingly seeing competing manufacturers up their prices at differing rates, not only to each other but in comparison to the rate of inflation,” Lindholm said.
Yes! Price gouging behaviour by price maker corporates operating in under-regulated capitalism are driving inflation, not worker wage demands!
NZ business are quick to pretend their price gouging isn’t generating greedflation…
Inflated company profit margins not a major factor in driving up prices in New Zealand – report
Inflated company profit margins, so-called greedflation, have not been a significant factor in driving up consumer prices, according to a new report.
Business NZ – a industry advocacy group – commissioned the report from economic consultancy Sense Partners, which concluded that input costs such as materials have been the major drivers of inflation.
The report said 75 percent of inflation for non-financial businesses over the past three years had been inputs with the balance evenly split between wages and profits.
…really?
…I believe this claim by Corporations that their price gouging isn’t causing inflation is nothing more than PR spin.
First it leaves out the ‘Financial sector’ category of business because – ‘Financial firms require more complex analysis, as the volume of services consumed is not conceptually the same, which is outside the scope of this paper.’ (Under heading 1. Profit-driven inflation approach).
The second major omission is the report ignores the structure/makeup of the New Zealand business environment; it is dominated by franchises, the most obvious are Starbucks/MacDonalds/KFC etc
A third factor is the report uses averages of profit margins from 2017 to 2022 to show pre and post covid profit margins. Averages – there are hundreds of business in New Zealand, many are franchises (I just explained how profits are stripped out), that are lean and hard working. These small businesses have relatively low levels of profitability. There numbers will pull down the average for the few central owner companies who could well be undertaking greedflation but the lack of granularity in this report means we simply can’t see the greedflation on this level of data.
…the issue regarding Greedflation is that price makers who enjoy under regulated market conditions can force us to take any price.
We see this in the Supermarket Duopoly, the Banking Oligopoly and Construction monopolies!
As the brilliant Professor Wayne Hope points out…
Inflation today does not have monetary causes and monetarist solutions cannot work. Edward Miller, economic researcher for FIRST UNION, cites a US Federal Reserve study which debunks the Phillips Curve. Organised labour’s declining bargaining power weakens the relation between unemployment and inflation. Wage-push inflation growth is just not there, so why contract the economy? In New Zealand, between 1991 and 2023, union density declined from over 50 to 20% of the workforce. Clearly, today’s stunted, uneven wage growth is not going to trigger an inflationary surge. Emeritus economics professor Tim Hazeldine proposes a more plausible diagnosis:
It’s COVID inflation that was driven by a supply push from the pricing side of the market. The initial transportation logjams caused by lockdowns gave shippers—especially container shippers—the excuse to drastically hike their prices. In the confusion, many other sellers of many other products discovered that they suddenly had, as one analyst put it, ‘real pricing power’. And boy did they use it!
International research points in the same direction. For US economists Isabella Weber and Evan Wasner, evidence acknowledged by US and European central bankers indicates that “price setting by firms with market power drive inflation”. Giant corporations have the product portfolios, dominant market positions and revenue management systems to maintain margins and customers. With global reach, they are less dependent on any single national market and can shape prices. By contrast, small businesses cannot easily raise prices as costs go up and interest rate repayments increase. Creditworthiness and access to loans will therefore diminish.
Sound familiar? As Tim Hazledine would attest, supermarkets, power companies and banks are pricemakers who drive up inflation while the rest of us struggle. Most obviously, the four largest Australian banks in New Zealand collectively made over NZ$6 billion in 2022. They exploit, ruthlessly, the margins between the interest rates of wholesale money for them and the mortgage rates for captive homeowners.
…look, inflation lowered in our last quarter because of softening oil prices caused by Biden tapping the US strategic oil reserves. OPEC responded to Biden with cuts which take effect next month on top of the 25cent fuel subsidy relief coming off, on top of unprecedented 100 000 migrants on top of food supply problems impacted by the recent cyclone damage to our horticultural industry – Orr is driving the Economy off an inflationary cliff and daring Grant Robertson to take the wheel!
Orr is saying monetarism can only go so far and that the Government must use fiscal tools like raising tax to sort this out!
Price gouging corporations who have used their under regulated market dominance to milk obscene profits from NZ and are now pretending they aren’t causing Greedflation and that it’s all then workers fault for demanding more wages.
UK just raised their OCR by .5, Australia also raised and the Fed have warned of two more rises.
In NZ, the Reserve Bank Governor is playing chicken with Treasury seeing who will blink first, Monetarism or Fiscal policy.
Month by month the economic house of cards gets more unstable and the rich who have benefited most keep tricking you into believing taxing them isn’t the solution, when it is.
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Yes, yes to the CTU, AS and FIRST Report.
Great stuff–but it is likely “pearls before swine” for people that do not investigate anything much in detail beyond tinfoil hat YouTube clips. Headlines, Natzo paid media channels & algorithm driven social media are where it is at for way too many NZers these days.
Post COVID grumpiness and intellectual laziness will be major factors in this years election, along with the usual alienated & non enrolled. The degradation of post, rise of renters & transience means thousands will just not get their orange Electoral Commission envelopes or be aware you can enrol and be counted right up to October 14. Another minor but important point is the lack of promotion for the unpublished roll which is handy to include debtors and those intimidated by others regarding voting.
Political alienation comes from no action on obvious issues; Supermarket gouging, tax system weighted for the already wealthy, oil industry rip offs, are all well documented but nothing gets done by the neo liberal Parliament. Until the new gens wake up and get organised it will be a difficult few years–hint: NActFirst will make things worse so be prepared…
Luxton’s feet should have been held to the flame a bit longer when interviewed on RNZ this morning. The interviewer did his best by suggesting Luxton consider the wider context, but sound bytes are not conducive to deep inquiry. Oh well, an opportunity lost. Luxton had the audacity to blame ‘the Labour government’ for inflation. An opportunity taken.
It’s interesting that you say soundbites from Luxon. Luxon is a political newbie, he is clueless on policy and running a country. Yes he ran a business but that is not the same as a country where the impacts of policy can make or break a society. As such we will continue to hear soundbites and his mouthpiece Willis will do all the talking.
It’s very noticeable to all how Simple Simeon Brown is at every press release and every photo op. He has come to believe he is a bigger person than most but was quite rightly bought down to earth yesterday in parliament by the speaker who threatened to expel Brown because of very juvenile comments. And people on this site believe National have the maturity to run the country. They are miles behind Labour in that regard.
I would rather have a ex business man in charge than someone who has only been a politican most of their working life .We had the with Jacinda and it was all good until the gloss washed off and she jumped ship leaving a mess behind her .
And I’d rather have a compassionate woman in charge than someone who has only been a politican for 5 seconds . We had that with Key and it was all good until the gloss washed off and he jumped ship leaving a mess behind him. And you are happy for history to repeat itself, good god!
What I meant NSC was the restricted framework the interview was squeezed into. No room for deep inquiry or full explanation. But agree with you. Luxton is still a bit awkward in interviews – that’s ok I guess – but when the script doesn’t go to plan and he’s put under a bit of pressure he doesn’t come across all that well. Just avoids answering the question and repeats himself. Perhaps in fairness could be said also of a good many politicians.
Cheers Bozo. As you say “that’s ok I guess – but when the script doesn’t go to plan and he’s put under a bit of pressure he doesn’t come across all that well.”
Not really the resume one needs for someone that will be on the world stage.
Who to believe?
There has been a massive decline in business profitability according to the government. Robertson said the consequent decline in corporate and company taxes (down $2,000 million) have had quite an impact on the tax take and contributed to the “fiscal hole”. Companies paying higher interest on borrowed capital may have had something to do with that but it doesn’t look anything like “price gouging” sorry.
Climate over-heating has and will cause business and domestic losses with large money valuations. The replacement will cause more system responses as lowering standard of living and inflation. This is not only the future but the future becomes now. We will need a high tax country to cope with justice. High tax countries are better than tax squeazing countries. Note the similarity with the fourth law of computing: ‘Things can get worse … without limit.” Consider how to manage de-growth ethically not wait for the imposition.
I can’t wait to see Lord Baron Luxon lower the price of oil and bring us all back from the dead – just like Lazarus – it’ll be a miracle.