Why is the link between supermarket pricing and inflation often overlooked or angrily ignored? The data suggests it is significant.
(I initially wanted to post this on ausfinance but they got mad at me once I mentioned the cpi and they said I didn’t understand how the economy works, I wrote this reply to them but I don’t want to post it there I wanted to post it here to see if you guys have any extra information or if you all blatantly disagree). I’m curious to hear your opinions. Since theirs was genuinely so outdated. I swear I felt like I was transported back to peak Ronald Reagan 1980s economic theory. Are they dumb or are they dumb? If their neoliberal theory worked so well why did Argentina get a bailout? They all said Argentina will be proof of neoliberalism? Then they collapsed and needed a bailout and suddenly no one wants to talk about Argentina. Suddenly no one wants to talk about 2008 either. Woah shocker, I wonder why.
I am sick of trying to talk about corporate greed on the ausfinance subreddit only to be told "that's not how the economy works" or getting called a liar. Traditional textbooks say inflation is only caused by government spending or low interest rates. But that is completely outdated and ignoring what is happening right in front of our eyes in Australia. The supermarket duopoly is actively turning global shocks into permanent domestic inflation. They act like an inflation accelerator and the actual data proves it. It is completely insane that as a modern economy our largest companies and the ones responsible for eating so much of our national wealth are supermarkets. It is insane that you all sit here and say yep thats totally legit. No it is dumb and it means our economy is dumb. If you actually knew how the modern economy worked Australia would have more than one globally competitive company that isn't based entirely on mining or supermarkets.
Look at our top tier corporate list, it is depressing. It is all just digging raw materials out of the ground or selling groceries to a captive domestic market. The only massive global tech success we ever produced that wasn't digging holes or selling milk is Atlassian. And what did they do? They realized the Australian financial system was too small and too obsessed with property and mining to support them, so they moved their corporate headquarters to the UK and listed on the NASDAQ in the US instead of the ASX. Additionally, sorry to break this to you but plop Coles or Woolies into a true capitalist market where they actually face global competition and tell me if they can survive. They cant. They suck. They are a government protected corporate monopoly that only survives because they completely cornered a captive domestic population. I am completely disgusted by their business model. Compared to actual global supermarket chains, when those international companies reach peak domestic revenue you know what they do? They didn't just sit on their hands, jack up prices, and try to corner the local market forever. They expanded to other countries. They actually built international sales, woah shocker, it is almost like that is what a real globally competitive company is supposed to do. But your ausfinances ignorance isn’t even bright enough to make that connection.
When we look at the Consumer Price Index understand that the CPI is directly decided by the regular prices of everyday household goods. That includes a massive percentage of products bought from Coles and Woolworths. Go look at the actual ABS CPI basket where food and non alcoholic beverages make up a massive chunk of headline inflation weights. Every single one of these exact expenditure classes like "beef mince, chicken breasts, milk, cheese slices, butter, loaves of bread, breakfast cereals, apples, potatoes, chips, toilet paper, and laundry powder" is completely dominated by Coles and Woolies. These aren't random luxury items, they are core essentials that make up the baseline CPI index data. When Coles and Woolies systematically inflate the baseline shelf prices of these specific everyday items, they are quite literally lifting the core CPI calculation. Acting like their pricing behaviour is a fallacy or has nothing to do with headline inflation is just stupid and that subreddit has a terrible habit of gaslighting and lying to push an outdated economic model to pretend this link doesn't exist. I am sick of dopes who got an education 100 years ago pretending they understand how the modern economy works. You don't.
If your textbook models are so perfect, explain why price stickiness occurred then? Explain why during COVID we didn't see massive deflation? When lockdowns hit and global demand for consumer items collapsed, we should have seen prices drop at Coles and Woolies according to basic supply and demand and your outdated model. But did we see deflation? Nopeee we didn't. Prices remained exactly the same or went up. They shot prices up like a rocket during the crisis and drop them like a feather now that it's over. How do you ignorant fools think that would affect the economy or are you too dimwitted to see how stupid you are? (Ausfinance)
You think I, in my big age have to teach you why a monopoly is bad? You think I have to sit here and explain to you dimwitts that hey guys, investing all of Australia's wealth into a supermarket chain is an dumb thing to do? No, that is not my job. It is not my job to have to research this stuff to explain to you dimwitts why this is a dumb economy. Honestly, this exact blindness is why I am leaving Australia and thank god for it too. I am not staying around to fund a system this broken while the general public sits around defending it and the RBA is trying to reinforce it. Genuinely, the RBA is run by a bunch of ******, they are genuinely dumb, like genuinely, when i heard they blamed government spending I genuinely laughed, what are they stuck in 2007, are they that dumb, have they not learnt anything from 2008. Thank god my mum kept our French citizenship, ouf. What a win.
You all pretend corporate profit margins don't drive inflation, but the actual data completely destroys your textbook neoliberal theories. Look at the international data. The IMF published massive studies showing that corporate profits accounted for over 45% of the entire inflation spike across Europe, while the European Central Bank found that corporate margins actually outperformed rising wages as the primary engine driving inflation. In the UK, the Competition and Markets Authority explicitly investigated how lack of retail competition allowed supermarkets to overcharge consumers on fuel and basic groceries leading to inflation, and the United States Federal Trade Commission is literally suing to block major supermarket mergers right now because they know concentration kills consumer pricing power. Domestically, data analysis from the Australia Institute proved that corporate profit expansions "not wages, and not government spending" were responsible for a massive chunk of Australia's inflation tracking above the RBA target because a duopoly with 67% market share can easily use "global shocks" as a smokescreen to increase their margins. It is called sellers' inflation, and it is a proven economic fact that has the ACCC dragging Coles and Woolies into the Federal Court for deceptive pricing practices and fake discounts, which is the exact reason the government was forced to pass the Supermarkets Excessive Pricing Prohibition law to make price gouging an actual civil crime. But the law is too weak and too broad to ever actually take them to court, so again win for the duopoly. Stop telling people they are dumb for pointing this out. The data, the international data, the ACCC lawsuits, basic common sense and the new federal laws all prove that corporate greed is a massive driver of this inflation crisis. Yes obviously so is oil shocks, but this too. Turn off the 1980s economic podcasts and open your eyes, we are ripping our country apart, destroying the possibility of any industries actually developing, and limiting our future and you are all too ignorant and illogical to see it.