Report shows earnings cause inflation in Australia

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

As most Australians struggle with rising inflation, a new study has found that profits, not wages, are the cause.

According to the ABS, Australia’s inflation rate is 5.1% and is expected to reach 7% later this year.

With inflation soaring, the debate over the role of wages has intensified in recent months.

However, a new study published today shows that only a “negligible” part comes from wages.

Wages accounted for just 0.6 percentage points of a 4.1 percent price increase this fiscal year, according to a new report from the Australian Institute.

The report notes that the continued impact of the Covid-19 pandemic and the sharp increase in global energy prices associated with Russia’s invasion of Ukraine are also important factors.

Earnings were 2.5 percentage points up, the report said.

The Australian Institute’s chief economist, Dr Richard Denniss, said the country is not experiencing the “wage and price spiral” that had been feared for months.

“This is the start of a price-earnings spiral,” Dr. Denniss said.

“National accounts show that rising profits, not rising costs, are driving inflation in Australia.”

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

He said the lack of competition is increasing the cost of living in Australia, not the lack of skilled labor.

“Wages did not contribute to inflation in Australia in 2019-2020 or 2020-2021 and accounted for only 0.6 percentage points of such a significant price increase of 4.1% this fiscal year,” said Dr. Denniss.

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