Report reveals profit is causing inflation in Australia

New data has revealed the truth behind rising inflation in Australia, and workers are not to blame.

As most Australians are struggling with the rise of inflation, new research has revealed the cause behind it is profits rather than wages.

The rate of inflation in Australia is running at 5.1 per cent, according to the ABS, and it is tipped to reach as high as 7 per cent later in the year.

With the rate of inflation rising rapidly, the discussion around the role of wages in recent months has intensified.

However, new research released today shows only a “trivial” portion has come from wages.

According to the Australia Institute’s new report, wages accounted for only 0.6 percentage points of the 4.1 per cent increase in prices so far this financial year.

The report found the continuing impact of the Covid-19 pandemic and the sharp increase in global energy prices associated with Russia’s invasion of Ukraine are also significant factors.

Profits have accounted for 2.5 percentage points of the increase, the report states.

Australia Institute Chief Economist Dr Richard Denniss said the nation is not experiencing a “wage-price spiral” as it has been feared for months.

“It is at the beginning of a price-profit spiral,” Dr Denniss said.

“The national accounts show it is rising profits, not rising costs, that are driving Australia’s inflation.”

While workers are being told to make sacrifices, Dr Denniss said the corporate sector needs to “tighten its belt”.

He said the shortage of competition is driving up Australia’s cost of living, not the shortage of skilled labour.

“Wages made no contribution to Australian inflation in 2019-2020, or 2020-2021, and accounted for only 0.6 percentage points of the 4.1 per cent increase in prices so fat this financial year,” Dr Denniss said.

Originally published as Report reveals workers are not to blame for rising inflation in Australia

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