Having to justify prices and profit

The Commonwealth Bank’s $10.16bn record cash profit has put a spotlight back on how companies should act in tough economic times. The bottom line is healthy banks enrich shareholders and help ensure the strength of the overall economy. This does not mean the CBA is beyond inspection, including the $10.4m pay packet enjoyed by its chief executive, Matt Comyn, but a full picture must include the fact it paid $3bn in income tax, with government payments growing faster than shareholder profit.

CBA must push its case because there is a growing appetite within the Albanese government and the trade union movement for extra taxation to be applied to what are considered super profits. The CFMEU has launched a major campaign demanding a super profits tax be applied to the nation’s richest companies to plug a half -trillion dollar hole in social and affordable housing investment over the next 15 years. It is a fair bet that CBA’s profit would qualify.

This is why the appointment of former competition tsar Allan Fels to chair an ACTU inquiry into alleged “price gouging by big business” during a cost-of-living crisis must be carefully watched. For the trade union movement, the inquiry will afford the opportunity for a series of public meetings where it can spruik its connection to the concerns of the ordinary person.

Professor Fels said the inquiry had echoes of the beginnings of his career at the Prices Justification Tribunal. In a 1974 paper, Professor Fels argued that a prices policy was “both a necessary and invaluable anti-inflation weapon in a full-employment economy”. A 1976 review of the operations of the tribunal found there was little or no evidence it was successful in reducing inflationary expectations, and that the PJT “owes its continued existence almost completely to political factors”.

Professor Fels concedes the PJT did not last long, but he says the ideas of government regulation and the oversight of pricing have never gone away.

The risk is there for the ACTU inquiry to morph into something altogether more sinister. Thankfully, voters are not easily misled. They rejected Gough Whitlam’s 1973 constitutional referendum for “An Act to alter the Constitution so as to enable the Australian parliament to control prices” but some within the union movement and Labor do not give up. Attempts at government interference across the economy are clearly back in vogue. We must avoid repeating the mistakes of the past.