Liquidate them all, says the AFR, where too many rate hikes are barely enough

Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. Purge the rottenness out of the system.

The famous advice of US Treasury secretary Andrew W Mellon to then-president Herbert Hoover as the Great Depression enveloped the United States seems to have found a home at The Australian Financial Review, especially after yesterday’s unexpectedly large drop in inflation.

The Australian Bureau of Statistics reported that its monthly inflation data for May showed inflation on an annual basis — 5.6% — falling to its lowest level since April 2022, surprising economists. Even when volatile items were stripped out, May saw slightly lower inflation — 6.4% — than April, and was well down on 7.3% last December.

Both indicators suggest inflation peaked over summer and has been falling fairly consistently since as the Reserve Bank has belted the economy with rise after rise to interest rates — despite extensive evidence that profit gouging by firms is the key cause of inflation.

This was welcomed as confirmation that the RBA doesn’t need to continue its relentless rate rises, especially as the impacts of this year’s rises have barely been felt yet, and given prominent economists are warning there’s already a one-in-two chance of a recession. Except at the AFR.

“The monthly consumer price index indicator is not as good news as it may seem,” economics editor John Kehoe warned. “Rising house prices, higher wages and weak labour productivity will also force the RBA to prepare to increase the cash rate.”

The AFR‘s editorial also insisted two more rate rises were needed. Why? Workers want wage rises. Childcare workers, warehouse workers, airline workers — everywhere you look, nasty workers want more pay. The editorial writers threw in a bit of racist paternalism to spice things up: “Even migrant farm labourers from South-East Asia, who some would suggest have limited bargaining power, have gone on ‘mogok’ — or strike — and are picketing their business that supplies salads to supermarkets.”

Yep, “some would suggest” that migrant agricultural workers — whose systematic exploitation in the industry has been documented for years — “have limited bargaining power”. That’s what an industry known for organised wage theft, shocking conditions, sexual abuse, visa rorting and modern slavery looks like when you run a business newspaper.

Jennifer Hewett joined in, arguing wages growth would cause the RBA to lift rates again. Economists were cited to explain that, yes, rates needed to rise. Just for a change, a fund manager was found to blame Labor’s loose fiscal policy, rather than workers, for inflation.

Liquidate, liquidate, liquidate is the mantra at the AFR, which wants to see interest rates continue to rise and, presumably, the economy sent pell-mell into recession.

Why? What’s the rottenness in the system that the AFR wants to see purged? The clue is in the incessant and deceitful emphasis that inflation is being driven by wages. The “rottenness” is workers — and their ability to seek at least nominal wage rises in a tight labour market, one where the impediments usually restricting workers and unions negotiating meaningful wage rises have been more easily overcome.

The AFR won’t stop urging interest rate rises until unemployment has been forced back to levels where workers will have to again endure the kind of real wage cuts that have marked recent years in Australia.

The real rottenness in the Australian economy is large corporations leveraging their power in highly concentrated markets to gouge workers, consumers and other businesses, which has been the biggest contributor to inflation, well ahead of the small impact wage rises have had.

But powerful corporations in uncompetitive markets are good for shareholders and company executives who enjoy far higher wages growth than workers — the AFR’s target audience. That’s one of the reasons you’ll rarely find any acknowledgment of the extensive evidence of the role of profits in inflation in the paper, except to deny it.

It’s very similar to the way the AFR at first eagerly reported the bonuses that a few US companies were handing out after the massive Trump company tax cut in 2017, as part of the idiot narrative that company tax cuts increase wages — only for those reports from the US to dry up once it became clear that US wage growth hadn’t shifted at all in response to the Republicans’ largesse to some of the world’s biggest firms.

The obsession at the AFR with punishing workers has its downside. If the recession its senior staff long for arrives, and corporate profits evaporate as households pull their heads even further in and joblessness grows, company profits will suffer and investors will also lose — albeit not anywhere near as much as the unemployed.

The AFR’s ever-diminishing ad revenue will also take another hit. Be careful what you wish for, even in a neoliberal fantasy land.