Inflation has probably peaked in Australia – yes, it was a transient episode

Given yesterday’s extensive National Accounts analysis replaced my usual Wednesday blog post, I am using today to discuss a range of issues and provide a musical interlude into your lives for peace. Yesterday’s bad National Accounts data release took the headlines away from another data release from the ABS yesterday – the monthly CPI data results. Inflation is falling in Australia and has probably peaked. The RBA still thinks it is going to hike rates a few more times. As more data comes out, their cover (justifications) are evaporating by the day and it is becoming obvious that they are pushing rates up because they want to reclaim the territory as the ‘boss’ of macroeconomic policy irrespective of the costs and hardships they impose on lower-income Australian families. Shocking really. I also look at the new RadioMMT show which launched last week. And the debate about Covid continues but the evidence is being distorted badly by those who continue to claim it was all a conspiracy to bring us to heel. And then some music.

Inflation in decline

Yesterday’s data release in Australia was dominated by the National Accounts for the December-quarter 2022, which showed that Australia is sliding towards recession as the RBA rate hikes kill off household consumption expenditure.

The latter is really only remaining in positive territory because the saving ratio is falling dramatically.

The RBA rate hikes are not only reducing disposable income for low-income families but destroying what little wealth holdings they have.

It is one of the largest redistributions of national income to profits and the wealthy that we have seen in a long while.

And for what?

Well, the justification is that the RBA has to repress excessive wage pressure.

Except, yesterday’s National Accounts showed that the wage share in national income, which also is a measure of real unit labour costs has not changed over the last 6 months of 2022.

What has changed is the profit share which has increased significantly as corporations with market power (supermarkets, banks, etc) push up prices well beyond any shift in unit costs.

So we can conclude quite confidently that there is no wage pressure pushing up prices.

The inflationary pressures are supply-side driven and the profiteers in the corporate sector have taken advantage of that cover to push margins up and record record profits.

So why does the RBA think that interest rate rises will solve that problem?

And why does the RBA in its insipid public statements try to claim it is a wage problem but never mention the market abuse by corporations?

Well you can answer those questions by now.

Yesterday (March 1, 2023), the ABS also published its latest – Monthly Consumer Price Indicator – which covers January 2023.

Remember, this is a new series from the ABS as it tries to produce more immediate price level data in between the quarterly CPI releases.

There are limitations with the monthly CPI indicator – it only covers about 60 per cent of the items that appear in the more detailed quarterly release.

But, despite that, it does give us some recent inkling about where the inflation rate is heading.

And the answer is down!

1. In December 2022, the annual rate recorded was 8.4 per cent.

2. In January 2023, the annual rate has fallen to 7.4 per cent.

3. In the month, Food price inflation has fallen from 9.5 per cent to 8.2 per cent, Clothing and footware from 6.3 to 3.1 per cent, Housing from 10.1 to 9.8 per cent, Transport from 7.3 to 6.3 per cent, Recreation and culture from 14.4 to 10.2 per cent.

4. In January 2023, the month-to-month inflation rate was -0.1 points having been 0.94 per cent in December 2022.

In other words, the inflation rate is declining quite quickly as the supply factors ease.

The following graph shows the latest annual and monthly inflation rates for the All Items series.

Inflation was starting to moderate in mid-2022, before any rate hike impact had been felt.

It accelerated a little towards the end of 2022 after severe flooding pushed food prices up significantly and people started paying ridiculously high airfares for travel as the airlines gouged profits.

I suspect it has peaked now and will decline relatively quickly.

The Bank of Japan officials understood that this inflationary period was transitory and would sort itself out in time.

That is why they chose to hold the line on monetary policy and not inflict any additional pain on households through interest rate hikes.

Instead, the Japanese government reduced the pain through various fiscal measures designed to ease households through the cost-of-living squeeze.

In other countries, including Australia, the neoliberals were out in force trying to reassert their primacy in the economic policy hierarchy and couldn’t wait to push up rates and inflict pain on mortgage holders.

But inflation was already showing signs of retreat as they did this.

It was an unnecessary exercise from that perspective.

It is time we took back control of economic policy and made it accountable to the voters.

RadioMMT is now on-air at 3CR Melbourne

I mentioned a few weeks ago that – MMTed – was helping Anne and Kevin with a new radio program at 3CR Melbourne (a community radio program).

RadioMMT – is hosted by Anne Maxwell and Kevin Gaynor and is presented on 3CR Radical Radio on Friday’s from 17:30 to 18:30.

Their promo title is ‘Economics for the rest of us!’.

I am really pleased to help them in this venture.

Their first show was launched last week and was a great success.

Their first podcast is out now – #001 Bill Mitchell: Speaking Economic Truth About Power.

This little audio gram sets the scene:

As part of the show, I am doing a fortnightly podcast – which will run for around 5-6 minutes and considers issues as they arise from an MMT perspective.

I will make that available via the MMTed – Home Page as well as through RadioMMT’s portal. I will announce the launch of that segment soon.

Is Australia Post about post or what?

There is a debate going on in Australia about the changes in the postal service and the decline in letter deliveries.

Australia Post is owned by the federal government on behalf of all of us.

There have been constant pressure to privatise it in the past but it would be political suicide I think given the place of our postal service in our culture – in a land where distances are great and isolation can be moderated by letters etc.

It is clear that E-mail and similar have reduced our frequency of letter writing.

I thought about that yesterday when I went to get my Covid booster shot and the clinic said ‘right or left arm’.

They use to place injections in the non-writing arm when we were writers.

Now we are typists, it doesn’t really matter which arm you get the injection – you just get a sore arm.

But the volume of letters being delivered in Australia is declining quite sharply and there is a debate about how will the federal government “save Australia Post” (Source).

Suggestions include abandoning letter deliveries.

Excuse me.

Isn’t Australia Post a postal service?

Letters are post n’est-ce pas?

While this might seem trivial, it is a classic case of what is wrong with the reasoning applied to public services.

What does ‘save’ Australia Post mean – given that the postal service is a public body?

Well apparently, Australia Post has reported that its ‘letter division’ has made a loss “for the first time since 2015”.

So what you might ask?

And you would be correct in concluding so what!

Today, the Government is going to release a paper outlining how it plans to reduce those losses – by cutting letter deliveries and pushing up the price of postage stamps.

The claim is that postal rates are low relative to other countries.

As an aside, when I came back from Japan at the end of last year, I posted some things back and couldn’t believe how low the charges were from Japan Post.

Australian postal charges are much higher.

The Government’s discussion paper (I cannot link to it yet) is obsessed about Australia Post generating enough revenue to make profits.

And the review going on now will get plenty of submissions demanding the service be privatised.

The principle is this – a public enterprise that is charted under law to “reasonably meet the social, industrial and commercial needs of the Australian community” does not have to make commercial profits.

It is a public service and while it should be run with minimal resource waste, it is flawed reasoning to assess its performance using the same metrics and framework that one would assess a commercial, private-for-profit corporation.

The federal government is the currency issuer and can meet any shortfalls in Australia Post accounts.

If the concern is that the ‘costs’ of production then rather than look to fundamentally alter the character of this institution and turn it into a courier service in competition with the myriad of the same in the private sector, the government should look at the ridiculously high management fees they pay the bosses at Australia Post.

The salaries and bonuses paid are obscene.

Further, there is an equity issue here.

I can do without letter deliveries.

I no longer receive long, hand-written epistles from friends every three months or so from the far corners of the Earth.

I get typed E-mails on a daily basis.

But there is still a cohort in our population who for various reasons, often age or income, who have not yet made it into the digital world and rely on letters being delivered to maintain their connectivity with society.

Getting rid of letter deliveries will punish those people, who are often in low-income cohorts.

Reading the science on Covid

I am a mask wearer – whenever I am in public settings.

I even wear a mask to watch the football in an open air stadium.

I purchased a ‘flo mask’ from the US, which offers very high protection.

I am not talking here about paper or cloth masks that are below N95/P2 standards.

I believe, on the balance of probabilities, that an N95 or higher mask protects me from acquiring a respitrary illnesses, including Covid.

There is a mass of credible scientific research that I have read over the last three years which provides the science to that ‘belief’.

I am very well trained in research design and would say I am an expert in mathematical statistics and econometrics, which means I understand research results and can understand limitations in the design of projects.

So when I read scientific literature I don’t just take the headline result but dig into the methodology etc to fully understand the qualifications etc.

I have concluded that the overwhelming body of research supports the notion that mask wearing is an effective way to reduce risk of infection.

You can see a sample of this research here – Science Brief: Community Use of Masks to Control the Spread of SARS-CoV-2

Recently, a report published by the Cochrane Library about mask effectiveness, which I won’t link to, has sent the ‘cookers’ out crazy telling us that they told us so – wearing a mask is a waste of time in terms of reducing the likelihood of being infected by Covid or any other respiratory disease.

If you read that report and understand methodology and statistics, then you would not come to that conclusion.

Fortunately, a public health expert at Columbia University has forensically analysed that research and summarised it for us.

The UK Guardian article (February 27, 2023) – Don’t believe those who claim science proves masks don’t work – will help you see how reported results than non-experts will interpret as concluding that masks don’t work are not valid and do not overturn the vast body of work that is credible and shows the opposite.

It is worth reading.

You will learn that the Cochrane meta-study examined 78 papers but only 2 of them were about Covid and masks.

And if you read the 2 research papers that were about Covid and mask wearing you will find they found that “masks did protect wearers from Covid-19″.

The other papers are about influenza which is much “less contagious than Covid-19”, so it is no surprise that mask wearing was found to be less important.

If you read Twitter and the rantings of the Great Barrington lot about this paper you won’t find reference in their work to the qualification provided in the Cochrane paper by the authors:

The high risk of bias in the trials, variation in outcome measurement, and relatively low adherence with the interventions during the studies hampers drawing firm conclusions.

That is tech-speak for ‘grain of salt’.

I will leave it to you to read the UK Guardian article further because it draws some interesting parallels with the way the tobacco lobby has worked over the years to convince us that smoking is not harmful.

The data doesn’t lie.

Covid is slowly wiping out the aged care population because we have abandoned precautions under pressure from the ‘cookers’.

The next variant, might just turn its attention on the rest of us.

Music – Kyoto Jazz Sextet

This is what I have been listening to while working this morning.

When I was working in Kyoto last year I heard about a Jazz band – the ‘Kyoto Jazz Sextet’ – which is a sub-project of the – Kyoto Jazz Massive.

The latter is a partnership of two brothers who are DJs and remixers in Kyoto.

After working together for 20 years, they assembled a full performing sextet which released an album – Unity – in 2015.

This song – Extra Freedom – is off that album.

When I return to Kyoto for several months later this year I hope to catch up with this band.

That is enough for today!

(c) Copyright 2023 William Mitchell. All Rights Reserved.

This Post Has 5 Comments

  1. “I am very well trained in research design and would say I am an expert in mathematical statistics and econometrics, which means I understand research results and can understand limitations in the design of projects.

    So when I read scientific literature I don’t just take the headline result but dig into the methodology etc to fully understand the qualifications etc.

    That is a given. However you haven’t spent 30 years as an epidemiologist studying respiratory viruses and how they work. Therefore both you and I are outside our field of expertise here. The Cochrane review has been in place for 15 years, and yet it is only now that the protocol of filtering studies for quality is being questioned. Why?

    Modes of transmission of respiratory viruses are 100 per cent clear only to ideologues. Those who have studied transmission know that the evidence in favour of one particular mode is never overwhelming, as respiratory viruses are capricious and difficult to pin down and likely transmit in many different ways, as the experiments in the 1960s have shown.

    If you are certain that transmission is by aerosol, you will assess or favour the most draconian face barriers. Imagine the surprise when randomised evidence suggests no difference and transmission takes place regardless. By then, you have committed yourself to “prove” something (something no real scientist would do), and the results may not be what you want. That is why there should be no sides in scientific disputes, only the advancement of knowledge.

    Supporters of observational studies make a big deal of the lack of external validity of randomised designs. External validity is the extent to which you can generalise study results to other situations and settings. What you get instead is a focus on laboratory experiments, but these lack credibility because of the artificial setting, which lowers the external validity craved.

    Randomised designs are also criticised for the lack of full compliance with mask-wearing or routine hand washing – If only everyone wore their ‘bloody masks or washed their hands.’

    However, compliance is an issue for all interventions. People prescribed self-administered medications typically take less than half the prescribed doses. What matters is the real-world effects based on what people actually do, not what you’d like them to do. A protocol is therefore essential because it sets out the specific nature of the intervention – what was done – which importantly allows replication of the intervention.

    If you do not know what was done to whom, how do you know what to do when setting an effective policy?

    The correct approach here is to do a study adhering to the proposed protocol that gathers the necessary evidence either way – or to question the protocol via the post-publication peer review system on the Cochrane site.

    Not publish an op-ed in a newspaper. That’s playing politics with science – again.

    We can hardly complain about neoliberal economics playing political games to prevent the truth being discovered and then indulge in the same game in another area.

    I say the same to Tom Jefferson when he talks about government not having the money to do this or that in the NHS, and I point him in your direction. He talks outside his expertise on that subject.

    Science must trump belief. Or we’re all doomed.

    Let’s get together, do the science and find out the truth.

  2. In Portugal, the Post Office was privatized in the “good” old days of the troika yoke (2010-2015).
    The right-wing government of the time said we had to “give up the rings, to keep the fingers”.
    (Forget about the platitude. I hate cliches and right-wingers breath cliches.).
    And so they gave the post office away to some hedge fund.
    I say “give it away”, because who owns it now only bought the “dog’s hair”.
    The “dog” has to pay for itself.
    And right-wingers don’t have any problems with that.
    It’s business and, anyway, government is just a business like any other.
    But not only that, they even demanded that the “petit gateau” would come with a license to start a new comercial bank.
    Buildings were sold to pay for the “dog”, while other buildings became banks (probably with a rent now, as hedge funds have been doing everywhere).
    Post delivery is now a dystopian feature: I get the invoice to pay for the water after the day it was due.
    But we got a new bank.
    Hoping it doesn’t become another giant hole.
    Hedge funds have this habit of eating the “petit gateau” and drop the dirty paper wraping to the ground, for someone to clean.

  3. In the UK, Royal Mail was sold off in 2013 (and remaining government holding in 2015), apparently ‘raising’ lots of money for the government. The government kept responsibility for pensions and sold it off on the cheap of course, in order that short-term speculators could nip in and make a quick buck. The intention apparently was to put it on a long-term sustainable footing, meaning postal workers should be squeezed and it become just like the other parcel delivery firms. A decent postal service of course ought to be provided in a wealthy modern society with an aging population and outlying areas, just as a decent bus service. I’d suggest that if a postal round is light on letters one day and this not being made up by junk mail, our good post workers could provide a most beneficial service in calling upon the aged people living in isolation and giving them a little regular chat. It might even keep some of them from entering our expensive but falling to pieces, private but reliant on government, care home system.

  4. Just want to thank you for your occasional comments on COVID-19, mask wearing, etc. Your comments about the fact that many of the “anti-masking” studies make claims that are inconsistent with the studies to which they refer is particularly helpful. I also wear a Flo mask now, after hearing about them from you. Anyway, thank you.

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