‘Price gouging has occurred’, inquiry hears as energy sector profits soar amid high inflation

A surge in corporate profits is contributing to inflation, a union-backed inquiry has heard.

Professor Allan Fels AO will appears before the first price gouging inquiry, commissioned by the ACTU in Melbourne. Picture: NCA NewsWire

Inflation is being caused by surging corporate profits particularly in the energy and resources sectors, the first day of a price gouging inquiry has heard.

Former chairman of the Australian Competition and Consumer Commission Allan Fels opened the inquiry, established by the Australian Council of Trade Unions, on Thursday and said “profit margins have gone up” and their role in inflation should be probed.

“I want to focus on the immediate prices, what is driving them, how fair or unfair they are, would they survive if there was true competition,” Professor Fels said.

“The community had a hard time during covid. It made sacrifices and complied with policies during lockdown and now we are coming out of it.

“Governments supported business very heavily during that time and now it is time to make sure business … does the right thing by us and doesn’t add that extra bit to prices.”

Centre for Future Work director Jim Stanford told the inquiry “price gouging has indeed occurred”.

“Companies have charged prices well in excess of the normal cost of production including a normal profit margin,” he said.

“The nature of this inflation is very different to the 90s wage prices spiral. During this cycle wages lagged the increase in prices. Real wages fell because . they were growing less rapidly and profits surged.

“We call it profit-led inflation. The phenomenon is recognising that companies have. the proactive capacity to set prices.”

Centre for Future Work policy director Greg Jericho told the inquiry an initial surge of inflation took place at the start of 2021.

“(This was) closely associated with a surge in price pressures (and) … the end of lockwon,” he said.

“Profit growth was most dramatic in the energy and resources sector. It wasn’t just this sector. There were profits in wholesale trade, manufacturing, and construction.”