Wage price spirals happen because [when the economy is operating near short term capacity], when the cost of living goes up, workers are able to demand and get more money, but that in turn leaves all firms incentivised to put their prices up some more. On the other hand, when prices go up, profits go up... and then firms don't really have any incentive to put their prices up any more because most of that profit isn't finding its way into their customers' pockets (that's a reason for Australians to be concerned about the welfare implications, but it isn't a "spiral"). I guess second order effects could include B2B companies and companies selling luxuries to recipients of executive bonuses and massive dividend payouts putting up their prices, but I'm not sure you get an economy-wide "spiral" from that in theory or practice...

The conclusion is already foregone, they work backwards from there, it's like asking ASPI about defense spending.

Source? If true, this doesn’t belong on HN.

What kind of analysis would you find independent enough to pass muster?

>The Australia Institute is a left-wing[2] public policy think tank based in Canberra, Australia [...]

>The Australia Institute claims to not accept donations or commissioned work from political parties.[51]

From their 'analysis':

"Record profits on petroleum and mining activities (reinforced by a spike in global oil and gas prices following the invasion of Ukraine) led this surge, but the overall corporate sector experienced the most rapid growth in profits of any comparable period in 35 years."

So because of global shortages, commodity prices reached record highs, and companies <b>which are price takers<b> benefited from that, is now suddenly corporate greed? BHP doesn't set the price for Iron Ore, the market does. BP doesn't set the price for Oil or Natural Gas, the market does. When you cut off Russia who are a key supplier of those goods, that creates shortages and causes prices to spike. This means companies which extract those goods will make more money as long as costs remain the same.

???

That's a whack thing to say with a straight face.

A profit-price spiral makes no sense as a concept without widespread collusion. Let me phrase what they are observing in a way that is actually based in market economics: when the monetary supply increases without actual productive increases in supply (due to things like QE, dovish monetary policy, stimulus) it leads to inflation. Inflation in both wages and good/services prices is not uniform - if you gave every billionaire $100mm you would see different effects than if you gave every person $1k.

What we’ve seen in a lot of economies is that inflation lately has shown up very quickly in consumer goods. You cannot necessarily increase the supply of consumer goods quickly - the supply is inelastic in the near term, especially since unemployment is low. As a business, if you are constantly running out of the supply of some good priced at $X it’s a pretty sure sign your prices are too low and you’re leaving money on the table - so business raise prices on those goods. And with very low unemployment rates, businesses cannot easily drive those profits into expanding their business because it’s hard to hire new people.

Of course, these business have also had to pay employees more and pay more for the goods they sell. But if the market price increases outpace those increases you get profits, and with low unemployment, those profits have nowhere to go except shareholders (or maybe M&A). The businesses would not just pay their workers more because they don’t know what to do with their profits - the entire reason they started a for-profit business was for profit so it’s fairyland thinking that the money would go anywhere else.