The Great Flation Theory: Price Controls and Inflation

Great Flation Theory suggests recent increases in prices are essentially firms just expanding margins and it's not necessarily due to any imbalances of aggregate demand and aggregate supply. Price controls don't actually reduce aggregate demand. Just changes spending patterns. In one way the effective price caps on energy might impact inflation through expectations. That means that future wage demands from people might be a bit lower because the actual true rate inflation has come down. So I'm very confident that we've had bigger increase in aggregate demand and we've had an aggregate supply shock as well. Australia definitely does have some problems with competitiveness in its economy. And I think the upshot for me is that competition policy is certainly not a silver