Economic data shows corporate profits contributed to inflation in Australia more than wages and employees

The Organisation for Economic Cooperation and Development is the latest leading economic body showing the important role historically high corporate profits play in driving up inflation.

The Covid-19 pandemic, war in Ukraine and supply chain crunch are among the biggest factors driving up the cost of living.

As such, inflation—that rate in which goods and service increase—has steadily climbed across many parts of the world.

Policy Director at the Centre for Future Work at The Australia Institute Greg Jericho said the latest modelling shows the crucial role of corporate profits in driving inflation.

“Companies, in a sense knowing this is an inflationary period, are having to increase their prices because of supply side issues and import costs.”

The Australia Institute has previously found companies in Australia and many other industrial countries have taken advantage of the disruptions, shortages, and desperation of the pandemic to push up profit margins far beyond normal levels.

In Australia, corporate profits reached their highest share of GDP ever in 2022.

“Workers are now struggling to catch up to prices, and recover the loss in their real wages. However, the RBA continues to ignore the role of profits in driving prices, while doubling down on its determination to suppress wage growth,” said Dr Jim Stanford, who is from the Centre for Future Work at The Australia Institute.