OECD Report Blows Lid Off Corporate Profits Driving Inflation in Australia

The Reserve Bank of Australia (RBA) raised interest rates in February this year due to concerns about rising inflation. However, research by Greg Jericho and David Richardson found that corporate profits were the main cause of increased prices, not higher wages.

According to an OECD report released earlier this month, corporate profits contributed more to Australia's rise in inflation than wages and other employee costs. The 2026 OECD Employment Outlook confirmed that profits drove inflation in 2022, as well as in the last half of 2025 and early part of 2026.

Australia Institute research found that excess corporate profits accounted for about 60 percent of recent inflation in 2022. A follow-up study by Jim Stanford estimated that this figure was even higher at around 69 percent. The RBA had initially believed that the tight labour market and rising wages were driving inflation, but the OECD report confirms that their approach was misguided.

The OECD's findings are based on analysis of national accounts data from Australia, the Euro area, and the United States. This new report should put to bed any criticisms of previous research, which was widely criticized by conservative economists and media outlets.