RBA governor Philip Lowe (Image: AAP/Joel Carrett)

Yesterday’s Reserve Bank interest rate rise from the final monetary policy meeting of the year was the eighth in a row, and sets up 2023 to be the year when the crunch will be felt across the economy.

Not on high-income earners, though, but on millions of households, mostly middle- and low-income, two-wage families or renters and people on minimum wages. All the people who are responsible for driving up inflation with their reckless spending and the much-feared wage price spiral. Just ask RBA governor Philip Lowe:

Wages growth is continuing to pick up from the low rates of recent years and a further pick-up is expected due to the tight labour market and higher inflation. Given the importance of avoiding a prices-wages spiral, the board will continue to pay close attention to both the evolution of labour costs and the price-setting behaviour of firms in the period ahead.

Isn’t it comforting to know that the RBA is paying “close attention” to wages when workers on average saw their real incomes fall by more than 4% in the year to September. Talk about focusing on the real issues.

Yet again Lowe, doubtless encouraged by the business representatives on the RBA, shows little interest in how large corporations such as Qantas, energy companies or Telstra have raked in millions.

For a brief time before the pandemic, Lowe was willing to intervene in policy debate over wage stagnation, to the extent of calling for governments to change policies. Is he now prepared to call out large firms taking advantage of Australia’s increasingly uncompetitive markets to maximise profits? Or recognise this as a key cause of inflation that is beyond the scope of interest rate rises to address?

If Lowe paid more attention to the behaviour of corporations, he might have been interested in Australian Bureau of Statistics data this week. Its business indicator data showed a fall in profits in the September quarter of 12.4%. That suggests inflation and weakening consumer demand are starting to have an impact, but profits are still up 8.5% over the year to September 30. (The business indicators also showed solid wage growth, but that’s aggregate based, not index based, and reflects a growing workforce.)

But the real profit position of business in the September quarter was underlined by separate data in the balance of payments and international investment data, out yesterday. Australia recorded a current account deficit ($2.3 billion) in the three months to September, our first in more than three years. Why? Not because our trade in goods and services went bad — it dipped $11.1 billion, but the trade account had a $31.2 billion surplus. No, it was a combination of a continuing surge in overseas travel which rose faster than inbound tourism and migration, higher costs of some imports such as petroleum — and a jump in the money paid to foreigners as dividends.

The ABS said the net primary income deficit widened to a record $33.2 billion in the September quarter 2022 “driven by strong dividend payments to non-residents on portfolio investment”.

“The key contributors to the record high income deficit were high operating profits, and increased non-resident investment in the resource sector, which contributed to strong dividend payments to non-resident portfolio investment,” the ABS said.

The September quarter is a key seasonal period for investment and income flows when June-balancing companies (full financial year or half-years) report their profits declare dividends and make payments to shareholders.

Despite a fall in our terms of trade during the September quarter, energy (oil, gas and coal), lithium, iron ore and some financiers all reported big profits and rising dividends for the quarter. Woodside, Santos, BHP, Fortescue, OZ Minerals, South32, Rio Tinto were among the big resource companies to do well and lifted dividends or maintained them to shareholders here and offshore. And Santos today added another $350 million to its current buyback of $350 million (which is all but exhausted by eager shareholders here and offshore).

In the case of energy companies, those profits partly represent a transfer of wealth from Australians, via higher energy prices, to foreign shareholders (though, remember, that’s because those shareholders invested here in the first place).

But the RBA is resolutely focused on low- and middle-income Australians and what it can do to belt them, even as they’re forced to fork out for windfall profits for energy companies — especially those silly enough to believe him when he said rates wouldn’t rise until 2024.

Or, as they say in the classics, the beatings will continue until morale improves. And given what 2023 looks like for so many Australian households, that’s going to take quite some time.