Australians are facing a brutal cost-of-living crisis. Rent, groceries, insurance, and energy is skyrocketing, while real wages are stagnant or have gone backward.
Yet, when we turn on the news, mainstream economists and politicians are still telling us we need to “tighten our belts” and cut public services like the NDIS. The Reserve Bank and the pro-business commentators in the mainstream newspapers claim that pay rises will trigger a dangerous “wage-price spiral”. The insist that the only way to decrease inflation is for the RBA to increase interest rates in order to reduce household spending and increase unemployment.
All of this is a deception, designed to present austerity as the only option.
What we are really seeing is the structural crisis of modern capitalism. In this crisis, the cost-of-living crisis is actually designed, deliberate transfer of wealth from everyday workers straight into corporate balance sheets and billionaire asset portfolios.
It is time for an alternative.
What could actually be done to dismantle corporate profiteering, protect working people, and rebuild a resilient, democratic Australian economy?
That’s what I outline in this post.
1. Expose “greedflation”
Inflation today is fundamentally driven by two forces: deep underlying vulnerabilities in our production systems and excessive corporate power.
When global supply shocks hit, like Russia’s invasion of Ukraine or the USA’s attack on Iran, massive corporations exploit the chaos. Instead of absorbing costs, monopolies and oligopolies, from the supermarket duopoly to giant fossil fuel suppliers like Woodside or Chevron, profiteer by increasing their prices far beyond the increase in their costs. The massive multinational corporations that have bought up our essential industries and businesses, like Kraft and Unilever, also use the cover of war and supply chain shocks to significantly increase the cost of basic food and other essentials.
Excessive profits were even larger in the US, where many important sections of the economy are dominated by a few powerful companies.
This surge in profits happened as wage increases largely failed to keep pace with inflation, and workers suffered their largest fall in disposable incomes since the second world war.
Researchers said the energy companies ExxonMobil and Shell, mining firms Glencore and Rio Tinto, and food and commodities businesses Kraft Heinz, Archer-Daniels-Midland and Bunge all saw their profits far outpace inflation in the aftermath of Russia’s invasion of Ukraine.
“Because energy and food prices feed so significantly into costs across all sectors of the wider economy, this exacerbated the initial price shock – contributing to inflation peaking higher and lasting longer than had there been less market power,” the report said.
After the analysis of 1,350 companies listed on the stock markets in the UK, US, Germany, Brazil and South Africa, the report said firms in the technology sector, telecommunications and the banking industry also pushed through significant price increases that raised their profit margins.
Greedflation: corporate profiteering, The Guardian
Inflation is a struggle over how national income is divided. When prices rise faster than your wages, your lost purchasing power is being directly converted into record-breaking corporate dividends and boosts to billionaire asset valuations.
For over a decade, real wages have stagnated for most people, meaning workers are the victims of inflation, not its cause.
We must start calling inflation for what it really is: a profit-driven wealth siphon, draining money from workers and everyday people upwards to the billionaires.
Read more here about the “everything crisis” of the housing unaffordability crisis and the role of the banks.
2. Reject wage restraint, rebuild union power
When corporate economists and central banks demand “wage restraint”, they are asking you to accept a permanent pay cut to increase corporate profits.
We never hear these commentators, RBA economists or conservative politicians calling for “dividend restraint” or “CEO-bonus restraint”.
Inflation is caused by rising prices. The entities that set most of these prices are businesses. And they could accept lower profits in order to keep prices low.
Like wages, dividends paid flush money into the market, bidding up the price of everything including property, raw materials and manufactured components such as microchips.
More important, however, is where dividends come from: they are necessarily created by corporations charging prices in excess of what they require to survive. They are charging prices that can give a return to the shareholders. Their very existence is evidence prices are higher than they need to be for companies to be solvent.
So if business leaders are worried about inflation, the most direct way to battle it would be to lower profit, lower dividends, and pass the savings on to creating lower prices.
What we need instead of demonising workers getting pay increases is the reverse: stronger wage increases.
At the very least, wages, salaries, pensions, and welfare payments must automatically increase at the rate of inflation. This is the minimum standard — it would ensure that people don’t go backwards. But inflation-matching wage increases still means workers are standing still.
Beyond matching inflation, pay increases must exceed it to claw back the wealth stolen from workers over the past almost two decades since the Global Financial Crisis. This should be primarily achieved through sector-wide bargaining led by unions.
Decades of anti-worker industrial relations legislation have systematically dismantled collective bargaining. We must overhaul industrial relations laws and the Fair Work Act to make striking legally viable and easy to take, protect solidarity industrial action (which is currently banned), and ensure union agreements can cover entire industries and supply chains. The most effective way to rebalancing workplace and economic power is through stronger, more active unions..
3. Cap prices and tax windfall profits
The orthodox, failed economic approach to reducing inflation is to increase interest rates. This can have devastating economy-wide impacts that primarily affect working people and people on low and fixed incomes. It is a blunt, often ineffective tool to fight inflation.
Raising interest rates for struggling working class homeowners in Western Sydney does not make global shipping cheaper. It doesn’t fix crop failures in the Murray Darling Basin caused by extreme climate change and water shortages.
All increased interest rates does is threaten workers with unemployment, higher mortgage payments (or rents) and an centrally engineered recession. The RBA isn’t doing this because it’s making a mistake or getting bad advice. An essential purpose of central banks is to protect capital accumulation by disciplining workers.
Instead, we must shift the burden of inflation onto those who profit from it and cause it.
We need the ability to bring in strong price controls that have hard caps for the essentials of modern life, including insurance, credit card transaction payments, electricity, fuel for transport, and basic food.
We also need to have permanent, automatic windfall profit taxes on big business. This would dis-incentivise these large (mostly foreign-owned) corporations from raising prices to price-gouging levels and would encourage them to reinvest into productive activity rather than unproductive, parasitic dividend payments.
Finally, we need to limit the size that these big businesses can get, so that small and medium businesses can compete and lower costs. Currently, the excessive pricing power of massive multinational corporations crush small local businesses, reducing competition and allowing monopoly pricing.
4. Reindustrialise Australia via public ownership
Australia was deindustrialised under the Abbott and Turnbull governments, when Tony Abbott and Joe Hockey decided to destroy our domestic car industry.
Since the Howard era though, Australia has been dangerously reliant on importing manufactured goods and exporting raw materials. This was exposed during the pandemic — as a national we are entirely exposed to international supply shocks for the most essential goods including pharmaceuticals, medical equipment, and building supplies. Because we closed down or didn’t build refineries, we buy back the raw materials from overseas as expensive refined material.
Decades of neoliberal privatisation have sold off our electrical grids, ports, roads, water rights, and freight transport, aged care, telecommunications and medicine production. This has allowed these asset managers to bleed Australia dry for profit.
Asset managers are unlike traditional owners of housing and other essential infrastructure. Buying and selling these life-supporting assets at a dizzying pace, the crux of their business model is not long-term investment and careful custodianship but making quick profits for themselves and the investors that back them.
Our Lives in Their Portfolios, interview with Brett Christophers
The profit motive is incompatible with the provision of essential utilities. Energy, water, public transport must be returned to public ownership and run for social need, not corporate dividends.
Reindustrialising means establishing an industrial policy that has the re-establishment of large-scale, advanced manufacturing in Australia. We must move beyond being the world’s quarry — so a critical part of reindustrialisation is to refine the raw minerals we currently export so the value is captured locally.
Similarly, while it may be impossible to re-start car manufacturing in Australia, we can certainly look at manufacturing other large, complex plant and equipment, and vehicles like buses, trains and trams.
A modern, industrialised nation also needs to invest in skills and research. Decades of underfunding have turned our universities into corporate degree factories and gutted our public TAFE system. We need to investing in free TAFE and free university for industrial, engineering, and trade qualifications, while also re-introducing the industry skills levy on big business to fund the training. It goes without saying that the CSIRO needs to be re-funded and directed towards public good research, not just commercial partnerships.
5. Democratise the RBA and financial system
The financial sector currently holds effective veto power over our national economic policy. The RBA is almost entirely shielded from democratic accountability and acts primarily to protect corporate profits and the stability of private financial institutions at the expense of employment and wages.
We must reject the neoliberal consensus that the Reserve Bank should be independent and technocratically run. Central bank independence is a neoliberal political choice, not a neutral scientific necessity. By being “independent”, that means the most powerful economic levers in Australia are handed to unaccountable, unelected bureaucrats and the corporate executives who are appointed to the RBA Board — the board and the Monetary Policy Board is dominated by corporate elites, commercial bankers, and orthodox academic economists. They can’t be voted out.
By bringing the Reserve Bank under explicit democratic control, the RBA’s mandate can be expanded beyond narrow inflation targets to prioritise full employment, structural economic reconstruction, and reducing economic inequality. This would look like having greater representation of unions, community groups and civil society on the RBA Board.
A democratised RBA would also directly finance of public-good infrastructure and other projects, like public housing, public transport and large-scale renewable energy projects. This would reduce the reliance by local, state governments and the Commonwealth on foreign, private bond markets.
The other pre-condition to democratising and taming financial markets is the introduction of capital controls. This means that there must be strict limits on moving money out of Australia.
Keynes understood the extent to which free capital mobility could distort a market economy. In his proposals for a postwar monetary system, he insisted on preserving national autonomy over monetary and fiscal policy, including the right to use capital controls when necessary. Unfettered capital flows, he argued, warped currency valuations, drove domestic credit creation, and distorted domestic interest rates. In this sense, free capital flows did not foster efficiency in a market economy; they constrained sovereignty and distorted efficiency.
Why Keynes Opposed Free Capital Flows, Michael Pettis
The unrestricted ability for billionaires and corporations to shift money out of Australia strips governments of their economic sovereignty. If a nation tries to tax extreme profits, break up corporate monopolies, or democratise its central bank, global finance retaliates. The bankers and billionaires pull (or threaten to pull) investment out of the country, crashing the currency, spiking import costs. Most governments are terrified of this capital flight.
Capital controls protect against the threat and reality of capital flight. It would mean introducing limits on how much money could be shifted out of Australia, and also minimum holding periods, so foreign direct investment actually builds our economy rather than extracting quick returns.
Without capital controls, any progressive economic program in Australia can be instantly sabotaged by international markets. By taking control of our financial borders, we ensure that decisions about Australia’s economy are made by the Australian people, not by international bond traders.
Let’s spark a better future
The current cost-of-living crisis is a choice that can be unmade by political decisions and actions. We don’t need to accept that the financial elite and billionaires are the only ones who see their wealth grow, while the rest of us suffer. We can reject and change the broken status quo.
By shifting our perspective and behaviour from passive consumers and economic victims to active citizens, we can dismantle the economic systems that concentrate wealth in fewer and fewer hands.
Australia’s most powerful resource is its people. Getting out of this crisis requires us to stop playing by the rules of the billionaires and speculators. We must build our collective strength through unions, and collective community organisations like tenants unions and cooperatives. And we must strip power away from the financial elite and build an economy designed to serve the vast majority.
Let’s take control of our economic destiny and spark a fairer, more resilient future for all.