The Guardian 30 January, 2008
Who is the target in
the government’s "war" on inflation?
The Australian government has declared that it is going to wage war against inflation as their number 1 economic objective at the present time. The rate of inflation reached 3.6 percent in the most recent figures announced by the authorities and this is outside the "comfort zone" of the Reserve Bank. It is generally asserted by both government and big business leaders that wage increases to workers put up prices and even result in the loss of jobs.
The Federal Treasurer Wayne Swan echoed this belief when he said that trade unions should take the risk of higher inflation into account when formulating wage claims. The governor of the Reserve Bank Glenn Stevens was more open, saying that higher wage claims based on rising food and energy prices could stoke underlying inflation.
Inflation has been described as an economic situation in which "too much money is chasing too few goods", the inference being that "too much money" is in the pockets of wage and salary earners. If that were the case the federal government should cancel the $30 billion of tax cuts promised during the election campaign as being irresponsible.
But who is really putting up prices? It is not necessary to look very far. Every motorist is aware of the steep rises in the price of petrol over the last year or so. Petrol prices are put up by the oil companies.
More than $55 million a day is being pumped into the economy by the government to pay for the military budget, the wars in Iraq, Afghanistan and interventions by Australia in East Timor and the Solomon Islands in our own region. Military equipment is not for consumption and soldiers in the field produce nothing that can be sold to consumers in the super markets. Yet the money flows into the economy in one way or another and becomes a major inflationary factor.
In the last few months the prices for food, fruit and vegetables has gone up by a stated 40 percent. These prices are not being put up by workers’ wages. In fact, if workers had higher wages they would be able to buy back more than they do at present, giving producers and traders higher returns.
Then there is the steadily rising cost of land and housing both for purchase and rental. It is the developers and real estate managers who use "the market" to justify the higher prices while governments build fewer and fewer public houses and units.
Nor is it workers who are responsible for putting up interest rates and, thereby, ripping billions out of the pockets of home-owners. Interest rates are determined by the Reserve Bank and the government despite the talk of the Reserve Bank being independent. We had another demonstration of who is responsible for putting up interest rates when all the banks put up their interest rates in January despite being reprimanded with a feather duster by the Treasurer and ignoring this role of the Reserve Bank.
When challenged to take action against some of these developments which directly add to inflation the federal government says it cannot do anything. That is true, but only because the government has given away all its powers to regulate or control the banks and other financial institutions. Furthermore, the present governments do not have the policies or the will to take any worthwhile action against the big corporations and the banks.
However, when it comes to the demands of the trade union movement for wage increases that would allow workers to keep up with the increased prices they are told to be "restrained". If despite this they take strike action to press their demands they will be condemned and workers and their unions heavily fined for their actions. There is a big club for workers and trade unions but milk and water words for the corporations.
The truth is that inflation is caused by the policies and the greed of the corporations — not workers’ wages. This reflects the class society in which we live. It remains the whole basis of capitalist society.