The magic of capitalism | MR Online

Reduce your expenses, extend your working hours or find additional employment, reside with your parents or find a roommate. However, under no circumstances should you pursue a salary increase to offset inflation, according to the guidance provided by Reserve Bank Governor Philip Lowe in recent times.

In order to achieve some of these results, the RBA is on the verge of pushing the economy towards a recession. The per capita gross domestic product experienced a decline of 0.2 percent in the initial quarter of the year, while the rate of household savings is declining rapidly. Additionally, consumption growth is coming to a standstill, as reported by the Bureau of Statistics.

In the minutes of the bank's May meeting on monetary policy, it was mentioned by the board that the unemployment rate will increase by 1% by the end of next year, leading to more than 100,000 individuals losing their jobs. It is not clear how this aligns with Lowe's encouragement to work harder. According to Alan Oster, the chief economist of National Australia Bank, the number could be even higher, possibly reaching 200,000 or more. Only time will reveal the truth.

In essence, the RBA's objective is to mitigate the impact of price inflation on wage earners by reducing their income. This peculiar rationale is a characteristic of capitalism. If this peculiar rationale seems utterly bewildering to you, it is possible that you may not belong to the appropriate socioeconomic group.

Why is that? Well, consider Lowe's advice for individuals to reduce their spending.

Individuals with lower incomes are already attempting to cut back on their electricity usage in order to save money. This is supposedly beneficial for the overall economy, as stated by Lowe. However, there is a drawback to this strategy. The Australian Energy Regulator predicts that prices will surge by 20 to 25 percent starting in July. This increase is in addition to the 15 percent rise experienced in the past year. In this situation, even if you try to decrease your usage, it ultimately results in higher costs. It's reminiscent of the David Copperfield economy, where the more money you spend, the more something seems to vanish.

Where does it lead to? So, based on the rising costs, AGL, a prominent energy company, is predicting a potential 150 percent rise in their underlying profits next year, as reported by the Financial Review. This is where the trick happens: one group's attempt to save money turns into a significant financial gain for a different group.

It's a similar situation with food: prices went up by 8 percent in the span of a year, but the amount of food bought decreased. Greg Jericho, who holds the position of policy director at the Centre for Future Work, mentioned in a recent issue of the Guardian that there has undeniably been a considerable rise in the amount of money we spend on food.

However, we are currently purchasing approximately 5 percent less food than initially projected prior to the outbreak. Nonetheless, the expenses have significantly increased.

In essence, Lowe suggests skipping one meal in order to benefit yourself, as it is also beneficial for "the economy". Meanwhile, insatiable grocery stores continue to excessively increase prices. Coles recently announced a half-yearly profit of over $600 million, showing an increase of more than 11% after taxes. Woolworths also reported a profit of $900 million, reflecting a 14% increase.

Therefore, we shell out additional funds to consume fewer goods, and the longing for sustenance among a particular group miraculously turns into a lucrative profit distribution for another set of individuals who hold shares.

It's the same when it comes to housing: Lowe believes that having more individuals in fewer residences will address the issue. During a Senate hearing last month, he stated, "Elevated prices indeed compel individuals to be more frugal with their housing expenses."

Children do not leave their parents' house because the cost of renting a place is too high, so you opt for a roommate or a housemate as a solution since it is the functioning of the pricing system.

Yes, children, it requires steep prices to compel you to adjust to the exorbitant fees imposed by banks and landlords. It's a remarkable phenomenon known as the price mechanism. Lowe is facilitating this mechanism by increasing interest rates, a decision made without guilt as mortgage payments, which have soared over $1,000 monthly on a typical loan, are not considered when calculating consumer price inflation. (An additional element of sorcery.)

The governor, naturally, remains silent regarding the abundance of vacant residences possessed by affluent individuals. Additionally, he has not proposed the option of renting out any of the five bedrooms in his Randwick residence at a significantly reduced price. This is not the manner in which the capitalist enchantment operates; the increased living areas of one social class are clandestinely erased from the equation, leaving the other class with diminishing living space as a result.

The current real estate market is reminiscent of the great escapologist, Harry Houdini.

And the situation is repeated once again regarding salaries. "We need to ensure that the increase in inflation does not result in an increase in wages for everyone," Lowe stated this month after raising the cash rate for the twelfth time within a span of fourteen months. In actual value, average salaries have declined by over 7 percent since reaching their highest point three years ago.

What happened to all the wealth that working individuals had? Surprisingly, a portion of it ended up in the hands of the employers. The most recent information, gathered by the Governance Institute, highlights that directors and managers at the largest companies in Australia experienced average salary increases ranging from 11 percent to 24 percent, depending on their role. Additionally, bonuses for general counsel and company secretaries have risen by a significant 49 percent.

The suffering experienced by a certain group of individuals translated into an increasing wealth accumulation for a different group. This phenomenon embodies the enchantment of capitalism in Australia.

Monthly Review does not necessarily follow or agree with all the opinions expressed in the articles republished on MR Online. Our aim is to present a range of viewpoints from the left that we believe will be engaging or beneficial to our readers. - Editors.