Analysis finds Australia’s inflation being driven by company profits, not wages
It&#x27;s yet another example of the gap that always exists between economic theory and economic practice. In this case, what we  have is that every player in the food chain has taken advantage of supply shortage to eke out additional margin along the way. And why not? Your products are in demand and there are buyers who are willing to pay more than the theoretical market price. The actual situation is that even if competition does assert itself eventually it is slow to adjust to changes in the environment AND there is very strong hysteresis: those with the opportunity are fast to put up prices and slow to lower them again to the same level even if prior conditions re-establish themselves.<p>Most of it goes to the lie that is the premise that interest rates are really the optimal way to control inflation, regardless of the source. When inflation is actually driven by consumers having too much money, fine, go for it. But when its driven by external factors all you are doing is causing misery and maybe adding fuel to the fire as people already maxed out buying essentials are in fact going to seek (require) higher salaries when you add to their cost of living.