The OECD’s annual employment outlook confirms that not only did profits drive Australia’s inflation in 2022, but that growing profits are also behind the most recent increases in prices that led to the Reserve Bank raising rates.

In February this year, the Reserve Bank raised interest rates because it was worried about rising inflation in the last six months of last year.

However, analysis by myself and David Richardson, showed that the major cause of increased inflation was increased profits.

Unfortunately, this was just a repeat of what occurred in 2022 and 2023, where the RBA punished workers with higher interest rates out of a misguided belief that inflation was being driven by higher wages and out of fear of a ‘wage-price spiral’.

The RBA believed that the level of unemployment was too low, and as a result, wages would grow faster, and then businesses would increase prices in response, and then workers would in turn bargain for even higher wages.

In September 2022, when announcing the fifth 50 basis point increase in the cash rate in a row, the RBA governor stated that:

“Wages growth........

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