The inflationary impact of petrol will force Orr to lift OCR

As TDB has been banging on for sometime, removing the petrol subsidy was always going to cause inflationary pressures, especially as this coincides with OPEC moves to cut production as the lack of Chinese oil consumption hits demand.

The problem with Orr’s capitulation to the market with his last puny 25 point rise alongside  his refusal to allow monetarism to allow the Government to shirk their fiscal responsibilities by claiming inflation has peaked is a big gamble.

The big reason inflation dropped in the last quarter was because of softening petrol prices driven by Biden tapping the strategic reserves plus the true cost of China rapidly reopening after Covid has seen sluggish economic sentiment and a looming debt implosion.

On top of that we have an unprecedented 100 000 migrants arriving plus the damage to our horticultural sector that will send food prices into the stratosphere.

Orr’s bluff to make the Government tax more or spend less by claiming inflation has peaked when it is about to explode again will not win Orr any friends.

Orr isn’t taking into account how trans national corporations are price gouging and generating Greedflation…

…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.

Stephen Minto points out…

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.

…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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