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Jim Stanford Profile picture
@JimboStanford
Jul 29, 2020 • 6 tweets • 2 min read • Read on X
Absolutely brutal #CPI number out from #ABS today: prices fell 1.9% in June quarter. That's deflation at an annualized rate of 7.3%--by far the biggest price decline in Aussie postwar history. Inflation was too close to 0 *before* #COVID19, so there's no room to maneuver now...2
In case anyone thinks falling prices is somehow 'good' for consumers, keep in mind:
* Consumers stop buying (waiting for still lower prices).
* Real burden of debts grows .
* Investment is chilled by fear of falling nominal revenues.
Deflation is what happens in a depression ...3
Regarding the fear that big govt deficits and RBA bond-buying raises a big risk of hyper-inflation, keep in mind:
* We need more inflation, not less.
* Inflation will help reduce real burden of COVID deficits.
* RBA has undershot its CPI target for 6 straight years. ...4
RBA should be instructed to commit publicly to renewed aggressive bond-buying ($10b+ per month) until unemployment is well below 5% and inflation exceeds its target. This will both push inflation expectations back up and facilitate aggressive spending by govt. ...5
Onset of deflation also confirms catastrophic failure of wage-setting in Australia. 7 straight yrs of record-low wage growth (2% avg since 2013) explains 6 straight yrs of below-target inflation. Yet Coalition govt wants more IR 'flexibility' to keep wages even lower! #WTF ...6
Australia must snuff out this deflation quickly, with:
* Aggressive fiscal injections, backstopped by extended RBA bond-buying. (RBA has stopped its bond-buying far too early).
* Aggressive measures to boost wages: including higher min wage and revitalised collective bargaining.

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More from @JimboStanford

Jim Stanford Profile picture
Aug 20
OK sir, now let's do 2024.
Hourly wages (measured by the LFS) have grown twice as fast as prices (measured by the CPI) in the last 12 mos.
And by the way, there are several other serious problems with that original chart, in addition to it being 2 years out of date. #cdnecon /2
Image
A. You don't calculate change in real wage by subtracting the inflation rate from % wage growth. You must calculate an index (dividing wage by CPI) and measure how that changes.
B. The proper change in so-called 'pay' (more on this below) for 2022 was thus -4.0%, not -4.3% /3
C. The StatsCan report which Mr Poilievre cites explicitly states (in both text & charts) that the real income change was -4.0%, not -4.3%. (They can do the math right.) So the CPC chart-makers deliberately chose to use a higher (but false) number. They can't claim ignorance. /4
Read 12 tweets
Jim Stanford Profile picture
Jun 26
This is an own goal: Grocery prices did not surge 1.5% on June 25, they grew by 1.5% over the 12 months ending in May 2024. That's *lower* than the rate when Freeland announced the capital gains reform, and *below* the Bank of Canada's optimal 2% target for inflation. #cdnpoli /2
Can we thus credit Freeland's tax reform for *lowering* the rate of grocery inflation? Of course not: it's ridiculous to link the two. Blaming taxes, instead of Loblaws, Cargill, PepsiCo, oil companies, and climate change for high food prices, is world-class bait and switch. /3
Also, this reform does not increase taxes on families who *run* farms. It counts 1/6 more of large gains made by people who *sell* farms--and only *after* exhausting $1.25m lifetime exemption, special reserves to avg one-time gains, & special rules for intra-family transfer. /4
Read 5 tweets
Jim Stanford Profile picture
May 31
🇨🇦 consumers ride to the rescue!! 0.7% lift in real household consumption accounts for almost all the 0.4% rise in real GDP in 1Q24. That in turn was thanks mostly to a 1.5% rise in labour compensation, which grew 3x faster than consumer prices (consumption deflator). #cdnecon /2
Real wages are growing now at a decent pace, thanks to feisty unions, higher min wages, and workers demanding real wage repair. That has literally saved 🇨🇦 from a recession. This is the macroeconomic phenomenon of wage-led growth in action. #canlab /3
For those still losing sleep over wage-price spirals, don't worry: the GDP deflator fell slightly, and the consumption deflator (akin to CPI) rose just 0.5%. That's the slowest since COVID lockdowns, and pretty much equals the Bank of Canada's 2% annual target. /4
Read 6 tweets
Jim Stanford Profile picture
Apr 16
Biggest non-story in #Budge2024 is the deficit. Fcst hardly changed from last year, despite new spending on several initiatives. That's partly cuz of new $$ from the capital gains change (which is great). But mostly cuz revenues keep outpacing pessimistic forecasts. #cdnecon /2
Those forecasts are still deliberately pessimistic, leaving room for positive surprises before the 2025 election. Conservatives who've invested so much in attacking govt for running bigger deficits will be disarmed. A smaller deficit does nothing to help with cost of living. /3
But direct help with necessities of life (dental care, drugs, child care, disability benefits, student lunches, PSE student loans/grants) will make an incremental difference. Most Canadians will receive something from one or more of those programs. /4
Read 5 tweets
Jim Stanford Profile picture
Apr 13
Not the worst thing to fear this awful day, but important anyway: get ready for another burst of oil-led inflation. Orthodox central bankers will claim the only thing to do is keep int rates higher, for longer--punishing workers further for a crisis they didn't cause. /2 #cdnecon
Can we learn from the Feb 2022 price shock, and stop profit-led energy inflation (which quickly spread into the broader economy) before it starts? Here's my Dec'23 @TorontoStar column with ideas for how to prevent another oil-led inflation outburst: . /3thestar.com/business/anoth…
The idea of regulating strategic prices (like energy) to stop inflation from getting going (rather than dragging down the whole economy to stop it later), first ridiculed, is now widely accepted (even by places like the Bundesbank), thanks to work by @IsabellaMWeber & others. /4
Read 4 tweets
Jim Stanford Profile picture
Mar 29
Carbon-tax fever is reaching a peak, as April 1 (when both the price and the rebate payments increase) approaches. So I'm re-posting my review of gasoline prices in calendar 2023. Key takeaway: the ups and downs of gasoline prices can't be ascribed to carbon pricing. /2 #cdnecon Image
Gasoline ended '23 5₵/litre lower than it began, despite a higher carbon price (worth about 3₵/l, offset by CAIP rebates). The ups & downs of oil prices are dominated by oil companies & futures markets, not carbon prices. The 2022 oil price surge added 40x more to gas prices./3
The federal Clean Fuel Reg (which Poilievre derided as a second carbon tax) had no lasting impact either. In fact, Cdns who followed Poilievre's advice to gas up before July 1 to avoid this 'tax' actually lost a few bucks (cuz prices *fell* afterward): . /4centreforfuturework.ca/2024/01/03/rev…
Read 7 tweets

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