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In Australia businesses like supermarkets, banks, the largest airline etc. have just announced huge profits in their latest reports.

I think the report definitely could have been better written, because a lot of the inflation is more due to passing on external cost increases, or domestic businesses raising their prices to account for inflation, and all keeping the same margins, hence resulting in larger profits in nominal terms. So I think it would have been more accurate if they’d put it that way.

The important thing is that it’s not demand driven - the RBA talks every update how scared they are and how important it is for them to avoid a “wage-price spiral”, which is nonsense. Median wages here have barely kept up with inflation for 10 years, and now they have gone strongly backwards. Absolutely no sign of any kind of spiral…

> In Australia businesses like supermarkets, banks, the largest airline etc. have just announced huge profits in their latest reports.

As someone who isn't from Australia, can you provide some actual figures, preferably with historical comparison? Without specifics "record profits" doesn't mean much. The most banal interpretation is that profits in nominal dollars went up, which is totally expected given that the economy grows and there's inflation, making it almost guaranteed that each year has "record profits" even if all else was equal.

I won't speak to Australia, but Rep. Porter did a decent job of that here:

https://youtu.be/udITRL9-t08

I'm not sure whether youtube is broken for me, but the linked video caps out at 480p resolution and on top of that it's letterboxed. As a result it's impossible to see what the chart is actually saying, or where the data is sourced from. Reading the transcript, the date range for the figures is "pandemic period" and "recent period", which means the comparison is probably bunk as a result of cherry picking.

Right, so instead of taking 5 seconds to search youtube for a better copy of this clip which is everywhere, you'll just assume your prejudice is correct? I don't know where you got your date ranges:

https://www.youtube.com/watch?v=0ixmqzjvb7k

>Right, so instead of taking 5 seconds to search youtube for a better copy of this clip which is everywhere, you'll just assume your prejudice is correct?

No, if the source you provided doesn't convey enough information, I'll assume that your claim is unsupported and respond accordingly. I'm not going to wade through the dumpster fire that is youtube search to try to do my opponent's work.

>I don't know where you got your date ranges:

From my previous comment:

>Reading the transcript, the date range for the figures is "pandemic period" and "recent period"

They correspond to literally the first few lines of the transcript

    0:00 according to this chart what is the
    0:02 biggest driver of inflation during the
    0:05 pandemic the blue is the dark blue is
    0:08 the recent period

>https://www.youtube.com/watch?v=0ixmqzjvb7k

I traced down the original source to be: https://files.epi.org/charts/img/248291-29919.png

I don't see how this addresses my claim that the data was cherry picked. If anything it strengthens it.

1. the date ranges chosen for the dark blue period starts at 2020 Q2 and ends at 2021 Q4. This is an unusual date range to pick. Most analysis use round numbers and/or whole years. The start date conveniently corresponds to the trough of the pandemic recession period.

2. the date ranges chosen for the light blue period covers a 20 year period. This date period probably isn't cherry picked, but comparing long run data with short run data is inevitably going to show discrepancies, since long run data is less volatile than short run data.

Given that the BEA publishes such data on a quarter to quarter basis, they could have easily made a line chart showing the data across two decades. The fact that they chose to use a bar graph that only shows numbers for two suspiciously chosen time periods, and their overall reputation[1] makes it hard to take the chart at face value.

[1] https://en.wikipedia.org/wiki/Economic_Policy_Institute

You can see Woolworth's (one of our supermarket chains) 5 half-years worth of results here https://www.woolworthsgroup.com.au/au/en/investors/our-perfo...

H23 H22 H21 H20 H19

911 798 1175 1024 1003

As you can see the 'record profit' is just coming off a low base.

so lets look at this closely:

Banks - banks make more money when rates are higher, as they can get a bigger spread between what they offer savers and borrows. CBA, Australia's largest bank has a net interest margin of 2.1%. This means that the difference between the cost of interest paid to savers, and that borrows pay is 2.1%. This 2.1% covers all of the expenses and profit the bank makes. Banks make obscene amounts of money due to the volume and value of the loans. Amazingly, banks want to maintain their NIM, to ensure they can fund all of the compliance costs, risk management, and technology costs. If you looked at the Investor Presentation you would have seen that in the last quarter the NIM for CBA dropped which is why the share has been sold off. Due to strong competition in the banking sector

Qantas announced record profit because demand for flights is really, really high, but flight volumes have not returned to pre-covid levels. This is why flights are still very expensive. Again, inflation is on the demand side, to counter the increase in demand, Qantas has raised prices to ensure the flight demand meets what it can supply. You will note, Qantas is also actively trying to build out more flight capacity to cater to the excess demand.

Supermarkets, I already spoke to, down thread. This is a reversion driven by reduced costs from COVID. 'Mr Kierath said it was important to note the companies' profits fell in the last six months of 2021, so these results were rebounding off an unusually low base.'

Ergo, they look good because they were depressed in the prior reporting season. Ergo, it's just corporations bashing, because people are mad inflation is going up.

If you look at Woolworth's profits over time, it would look to be going back to normal levels[1] after a dip due to COVID. [1] https://www.statista.com/statistics/1116200/australia-net-pr...

> Qantas has raised prices to ensure the flight demand meets what it can supply.

This is weasly language for "price gouging". There's literally no problem with Qantas just selling the seats they had at reasonable prices and then saying, "sorry, no more seats available".

Instead, you're trying to portray it as totally natural and just that they take advantage of any circumstances to squeeze as much out of their customers as possible.

Market-think has perverted your worldview. The people tolerate markets because they generally serve the common good via innovation, competition and self organization. When the market deviates from that objective, like by price gouging to enrich a few at the expense of the public, it is right to criticize and correct it, not try to justify that the market is right and the common good is wrong.

That's what markets do, they co-ordinate supply and demand. If you can't raise prices to ease demand, what do you do?

That extra money they are making, is then used to invest in more planes, and crew to staff more flights to serve more customers/

You can't have capitalism, without both sides of that coin. That's how markets work.

> That extra money they are making, is then used to invest in more planes

No, they're spent on stock buybacks to enrich shareholders, instead of invested back into their workforce or expanding capacity:

https://www.youtube.com/watch?v=udITRL9-t08

I don't know why people keep believing in this myth, this reinvestment only happens when there's sufficient competition and no coordination, which is not the world we live in.

If there is 1000 units of something but demand for 5000 units, you increase the price until demand equals 1000 units. There is no conspiracy. This is fundamental economics.

“Market-think” is about freedom. The alternative is “authoritarian-think” and that always ends in tears. Just start setting prices by government decree and see what happens.

In the case where products can be profitably produced at a cheaper price, the people should band together, put aside the market system, and produce all 5000 units. More people are served.

If its costs $100 to fly somebody from Sydney to Melbourne and Qantas is selling tickets for $1000, Australians should run an airline and sell tickets for $200.

Governments should get into the business of keeping markets competitive.

Even in an ideal world where there's no fundamental difference in the cost of producing 1000 units or 5000, companies aren't going to be able to sell 5000 at the same price as they could 1000 when doing so exceeds their current capacity. Expanding that capacity means more staff and equipment, which costs money that has to be paid for somehow. It also takes time, which means that it cannot act as an immediate solution to the cost problem and also that there's substantial risk involved - by the time the extra capacity is there, the demand may not be. In order to justify taking on this risk there needs to be the expectation of substantially higher profits.

Also, commercial airlines in particular are an industry with a history of over-optimistic expansion followed by cut-throat competition on pricing and then bankrupcy, and I'm pretty sure everyone in the industry knows this by now which is why there's not a huge rush to expand massively.

I personally think airline tickets need to be taxed heavily so that travelers pay for every ounce of carbon emitted to be captured.

>the people should band together, put aside the market system, and produce all 5000 units. More people are served.

You just described a command economy, which have a poor track record historically.

I didn't suggest government should dictate production levels or prices.

I am suggesting governments should consider putting together not-for-profit, but self funding organizations, with fair and reasonable salaries for all employees, to produce good and services for its people.

Then you allow the free market to compete against that baseline profitable business.

If for profit companies can't produce a better or cheaper product, they should just not exist.

Australia's ABC is a good example of what I am talking about. There are commercial offerings, but there is a baseline keeping standards up.

Of course gets a lot more complicated when your state sponsored factories can't compete on quality or price and is not selling any widgets at all. At what point do you decide the market is working to your satisfaction and you should shut it down.

How much of a loss do you allow? How much is it worth to a country to be able to build x widgets or offer x service?

How good would it be if we still had the ability to manufacture things here in Australia? How do you put a dollar value on that?

>I am suggesting governments should consider putting together not-for-profit, but self funding organizations, with fair and reasonable salaries for all employees, to produce good and services for its people.

What specifically does this entail? Is the government providing starting capital? Or is it in charge of creating the organization and letting them handle the rest?

>If for profit companies can't produce a better or cheaper product, they should just not exist.

>Australia's ABC is a good example of what I am talking about. There are commercial offerings, but there is a baseline keeping standards up.

According to wikipedia ABC receives more than a billion dollars per year from the government. How can you say with a straight face that companies that can't compete with that "should just not exist"?

>What specifically does this entail? Is the government providing starting capital? Or is it in charge of creating the organization and letting them handle the rest?

In my imaginary utopia, they are public servants paid salaries and benefits directly.

The government already provides heaps of starting capital for business it wants to get get off the round.

>According to wikipedia ABC receives more than a billion dollars per year from the government. How can you say with a straight face that companies that can't compete with that "should just not exist"?

Every Australian pays just a few cents a day for our ABC, and I can say it with a straight face, because there are profitable commercial channels here in Australia that it directly competes with.

Aussie post is similar, there is a nationalized option, and there is commercial competition. I believe Aussie posts runs a profit as well, ABC is pure expenditure.

I'm not an expert in any of this, just think its fun to muse about when it pops up here on HN.

>In my imaginary utopia, they are public servants paid salaries and benefits directly.

Oh also, these millions of jobs the government is providing. You could think of these as a UBI. Fairly easy to get. You can move around between them fairly easy until you find one you like with people you enjoy spending time with.

Government do get into the business of keeping markets competitive. That is one of the drivers for regulation. You will note, Qantas isn't the only domestic airline in Australia.

Airlines are also highly capital intensive. It costs a lot of money to own and maintain a plan

> If there is 1000 units of something but demand for 5000 units,

Except that's not the case here, both supply and demand for eggs and milk have not changed much, neither have the costs to produce either. That's why prices are skyrocketing and profits are soaring.

Look, the data is out there and very clear on this point:

https://www.youtube.com/watch?v=udITRL9-t08

>both supply and demand for eggs [...] have not changed much

https://en.wikipedia.org/wiki/Avian_influenza#United_States_...

Yes, they euthanized a bunch of chickens, and yet total egg output remained basically the same. So where did the inflation come from? Why are egg producers suddenly recording record profits?

>and yet total egg output remained basically the same

source? Also, due to how price elasticity curves work, even if production is "basically" the same, it doesn't necessarily mean that prices would also be "basically" the same. If demand is inelastic, buyers will bid up prices to astronomical levels.

Qantas is particularly scummy. They received over $2B in taxpayer money in bailouts and other concessions, stood down thousands of employees and did a $500M stock buyback.

Qantas has announced plans to create 8500 new jobs over the next decade to grow Australia’s biggest carrier now it’s back to reporting billion-dollar profits after COVID-19 read more

https://www.smh.com.au/business/companies/qantas-commits-to-...

>This is weasly language for "price gouging". There's literally no problem with Qantas just selling the seats they had at reasonable prices and then saying, "sorry, no more seats available".

>Instead, you're trying to portray it as totally natural and just that they take advantage of any circumstances to squeeze as much out of their customers as possible.

Would you not have done the same? Seeing that we're on HN, there's a good chance that you took advantage of the pandemic tech bonanza (ie. tech companies paying astronomical amounts for developers). If you were currently making $150k, and some tech company was offering you $250k, would you turn down that offer because you want to sell your labor "at reasonable prices"?

No, I haven't done the same, for years in fact. But that's besides the point, because individuals are simply not in the same power bracket as powerful corporations that dominate whole markets, particularly when corporations have a proven track record of behaving unethically.

>No, I haven't done the same, for years in fact.

Note this isn't limited to job hopping. If you saw the red hot job market and asked for a raise, that's arguably the same.

>But that's besides the point, because individuals are simply not in the same power bracket as powerful corporations that dominate whole markets, particularly when corporations have a proven track record of behaving unethically.

What are you trying to say here? That corporations are unethical and as a result shouldn't be conferred the right to raise prices? Or that price rises in absence of increased costs doesn't count as price gouging, unless you also have "power"?

Appreciate you taking the time to write this.

Well it isn’t wages fuelling the inflation. Wages aren’t rising but our mortgage repayments certainly are!

It’s so wrong to pretend that sellers don’t have a say in how much they ask for their goods that it borders on disingenuous. To blame the market (as if that existed apart from buyers and sellers) is to ascribe agency to something which is wholly responsive in fact.

If buyers are willing to pay $80 for a barrel of oil, must BP ask for $80 and not a cent less? Of course not. You may claim they are right to do so, but don’t pretend they have no choice and therefore no blame if there are ill effects to such pricing.

>If buyers are willing to pay $80 for a barrel of oil, must BP ask for $80 and not a cent less? Of course not. You may claim they are right to do so, but don’t pretend they have no choice and therefore no blame if there are ill effects to such pricing.

Since we're talking about commodities, prices are most likely set by bids/asks from all participants, rather than your model of a shopkeeper deciding what to write on price tags. If the current bid/ask for crude is at $90/$91, then there's no reason why BP should sell their oil at $80. Doing so would just end up giving $10 worth of value to whomever accepts BP's offer. In fact, you can even make it a business, by beating everyone else to the punch, buying oil at $80, then selling it back to the market at $90. The only way to avoid this is to sell the oil at market prices.

During drought, I can sell a glass of water to people dying of thirst for a bag of gold.

Yeah. Im sure global inflation has nothing to with cheap almost unlimited credit created by central banks around the world all around the same time. Including the one responsible for the world reserve currency: the USD.

I mean, if a large group of people with income x, suddenly have access to 2x more credit for a mortgage that would do nothing to say... housing prices right?

It blows my mind how media so succesfully can completely steer away everybody from the quite obvious root cause with essentially "hey look, Putin, covid and a Chinese balloon".

Please explain how "the market" does set a price.

Please do not do that in a symbolic, abstract way, please describe based on facts who writes a number into a computer that will be the price.

How does this happen?

Do you believe that there is a mythical "market" entity that "creates prices"?

Then please explain how it works. Thanks!

> please describe based on facts who writes a number into a computer that will be the price.

The person selling the goods, with a limited but sole-focused understanding of the competitors, stock coming in, stock going out, and forecasting does the best job he can to set the price that maximizes his individual profits