New research confirms that corporate profits in Australia, despite recent moderation, remain well above historic norms, and must fall further in order to allow a rebuilding of real wages in Australia that have been badly damaged by recent inflation.

The roles of profits, wages and costs in driving inflation has been widely discussed in recent months. Claims by the Business Council of Australia that profit shares are at a 20-year low are not supported by official data sources.

Labour costs have played an insignificant role in the recent increase in inflation, accounting for just 15 percent of economy wide price increases while profits have played an overwhelming role, accounting for about 60 percent of recent inflation.

The provision of free childcare provides the rarest of economic policy opportunities – it’s both an effective form of fiscal stimulus in the short term and has the capacity to boost the long-term participation rate and, in turn, the long run rate of economic growth.