Key points:

• The Australia Institute and its Centre for Future Work, which were among the first to identify the role of record-high corporate profits in driving the acceleration of inflation after the COVID lockdowns, made a major submission to the Fels inquiry and appeared before its public hearing in Melbourne in September 2023
• A 2023 Centre for Future Work report showed that over two-thirds of excess economy-wide inflation (above the RBA’s 2.5% target) from end-2019 through the September quarter of 2022 was attributable to higher unit corporate profits.
• Australia Institute reports documented that the rise in profits was strongest in industries with concentrated or strategic power in the broader economy: including mining and energy, manufacturing, construction and wholesale trade.

“Prof Fels’ careful review confirms that price-setting strategies by corporations, including many obviously unfair and exploitative practices, have contributed significantly to the cost-of-living crisis afflicting Australian households,” said Greg Jericho, Chief Economist for the Australia Institute.

“Since the current inflationary cycle began after COVID lockdowns, there has been too much attention on wages, labour costs, and consumer spending as the supposed drivers of higher prices. The RBA and other policy-makers have been too slow to acknowledge the role of profit and greed in pushing up prices.

“This inquiry marshals abundant evidence from official statistical agencies, international economic organisations, think tanks and academic research to show that corporations have taken advantage of the pandemic and its aftermath to exploit consumers and drive up inflation.

“Prof Fels’ report contributes to a more accurate understanding of what is causing the cost-of-living crisis, and a more balanced and fair strategy for solving it.”

“Australian corporate profits have moderated in the last year, as supply chains were repaired and energy prices retreated. This has been crucial to the partial slowdown in inflation experienced in the same time.

“But further reductions in prices for many essential goods and services are required to fully repair living standards, and Prof Fels’ recommendations for more exposure of excess prices and stronger competition measures to reduce them would help a lot.”