A matter of interest: the RBA, inflation and corporate profits

In what could only be seen to be a campaign launched on behalf of big business and its followers, calls for repudiation and recanting followed. Economics academic Richard Holden demanded that the Australia Institute "admit their mistake and retract their so-called analysis."

There was just one problem with the criticism of Stanford and company. Far from being methodologically unsound, other notable bodies had embraced it. As part of its 2023 Economic Outlook , the OECD, on decomposing the GDP of 15 nations, found "a significant part of the unit profits contribution has stemmed from profits in the energy and agriculture sectors, well above their share of the overall economy, but there have also been increases in profit contributions and manufacturing services." It also found that "a large part of the higher unit profits contribution originates from mining and utilities, even in commodity-importing economies".

Earlier this month, the President of the European Central Bank (ECB), Christine Lagarde, also focused attention on the role played by galloping corporate profits in pushing up inflation. The data on corporate profits, she rued, was simply not as good as it was on wages.

On this score, the economic managers in Australia have revealed themselves as callous and conservative. Bedazzled by the extraction industries and unable to pursue a productive agenda, they continue to wage war on those irritating wage earners who demand absurdly modest increases to keep pace with inflation. As long as Lowe and the RBA are allowed to do it, more harm is in the offing.