Portugal caps rents, gives away vacant flats & suspends VAT on basic foodstuffs

Publicerad denFörfattareneuezeit.at

Inflation is driving more and more unexpecting people into poverty. The Austrian People’s Party (ÖVP) and the Greens nevertheless refuse to take action against the skyrocketing prices. The Portuguese government shows that there is another way: it already capped rents last year. Recently, Portugal has started renting out vacant flats and suspended VAT on 44 basic foodstuffs.
Between 2017 and 2022, rents in Portugal increased by 42 percent. The country is one of the poorest in Western Europe. Although the government only raised it in December, the minimum wage is just 760 euros a month. More than half of workers earn less than 1000 euros per month.
The government of the socialist Prime Minister António Costa has therefore limited rent increases. Landlords can increase them by a maximum of two percent. Costa’s next step is to put about 730,000 vacant flats on the market. If a flat remains unoccupied for more than two years, Portugal will have it forcibly rented out.
Putting vacant flats on the market
Owners of vacant flats receive a rental offer from the municipality, to which they must respond within ten days. If they do not accept the offer, they have another 90 days to rent out the flat or use it themselves. If the owners continue to do nothing, “municipalities proceed with the compulsory leasing”, according to the planned law. In this case, the municipality manages the flat and, if necessary, carries out renovation work to make it habitable. They then put the flats on the market for five years at low rents. According to the government, rents may not exceed 35 per cent of the family income. The income – minus the renovation costs – is paid out to the owners. There is an exception for properties that registered as tourist enterprises or local accommodation establishments. Flats that are currently being worked on or are about to be sold are also excluded.
Austria: ÖVP & Greens fueling inflation instead of relieving the burden on tenants
In Austria, the situation is different. Here, too, the government discussed a rent brake at the end of February. In the end, however, the ÖVP and the Greens opted for a housing cost subsidy. While 250 million euros will be paid out as a one-time payment, the increased rents remain the same or rise further in the future. Moreover, the housing cost subsidy ends up back with the landlord after the rent payment. The inflation rate in Austria in February was 11 per cent. Tenants not only have to pay higher prices for energy and electricity like everyone else, but also higher rents.
Gabriel Felbermayr, head of the Economic Research Institute (Wifo), also criticises the government’s approach. “I thought it was clear by now that more and more new cash transfers can cushion social hardship, but do not dampen inflation, instead they even fuel it”. The state does not have these 250 million euros and has to borrow them on the capital markets; if you put new money into the economy, it drives up prices, Felbermayr said. In his view, the rent brake was a way to get out of the price spiral.
Portugal suspends VAT
The government in Portugal on the other hand, is not only putting vacant flats on the market, it is also curbing rising inflation by suspending VAT. For the time being, it is suspending VAT on 44 basic foodstuffs for six months. If necessary, it wants to extend this period. This measure is part of an agreement with producers and retailers to stabilize prices as soon as possible. The government also foresees financial support for farmers and livestock in this framework. The suspension of VAT will make bread, eggs, meat, oil, yoghurt, fish and cheese, among other things, cheaper and more affordable for Portuguese households.
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New study: Corporate profits drive up inflation in Australia – not higher wages

Publicerad denFörfattareHarry Markham

A recent Australia Institute report has shown that profiteering is the source of the country’s high inflation. This is in contrast to the Reserve Bank of Australia’s fearmongering claims that higher wages are the main threat to economic growth and security. The report highlights the need to control excess profits and artificially increased prices in order to protect the purchasing power of workers, and argues that increased wages should not be feared.
We’ve all heard the argument before—if wages increase, prices must increase to cover those wages, and the end result will be inflation. This theory is referred to as the ‘wage-price spiral’. It is often wheeled out to shut down any demands for fair pay, and particularly for the raising of the minimum wage. Contradicting this argument, a study by the Australia Institute has found that inflation is more the result of a ‘profit-price spiral’, with 69% of the nation’s inflation being attributed to excess profits.
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Australia Institute calls wage-price spiral ‘economic fairy-tale’
For many people, the wage-price spiral argument provokes suspicion. Inflation is all around, but wages don’t seem to have risen in line and surely can’t be to blame for higher prices. In Australia, inflation reached a year-over-year rate of 7.8% by the end of 2022. This has resulted in a major hit to the real purchasing power of working Australians.
Australia faces a macroeconomic slowdown due to higher interest rates, which means job losses and even greater income losses in the coming months—all while the nation reports an unprecedented upsurge in business profitability. These profits are shown in the report to be the result of businesses increasing prices well beyond incremental expenses for their own purchases. The institute states that:
“new empirical evidence confirms the dominant role of business profits in driving higher prices in Australia – not wages.”
They argue that the focus of monetary policy by the Reserve Bank of Australia on wage restraint is misplaced and unfair, and that more attention should be given to the artificial inflation of prices by businesses. Dr Jim Stanford, the researcher behind the report, said:
“we’ve been told a story that workers need to restrict wage growth and accept a permanent reduction in living standards in order to fight inflation. This report shows that’s an economic fairytale.”
Report’s major findings suggest profit-price spiral
The Institute’s investigation found that as of September 2022, Australian businesses had increased prices by a total of $160 billion per year above their higher expenses for wages, taxes, and other inputs.
Had those excess profits for Australian-made goods and services not been engineered through increased prices, average annual inflation since 2019 would have been 2.7% per year, as opposed to the reality of 5.2%. This would have also meant that such harsh interest rate hikes would not be necessary, and Australians would have been spared the worst part of job losses and a cost of living crisis.
Despite this empirical evidence, the Reserve Bank of Australia, who conduct monetary policy within the nation, repeatedly refer to the dangers of a wage-price spiral and make almost no reference to the role of excess corporate profits in driving inflation. In their most recent statement from February 2023, the Reserve Bank mention wages 75 times and profits only once. This is despite the fact that corporations have increased their profits much faster than the nominal growth of Australia’s economy, and have benefited from the acceleration of inflation since the pandemic.
The report states that the focus by the Reserve Bank of Australia on suppressing wage growth in their anti-inflation policy and ignoring the role of record profits:
‘blames the victims of inflation, while ignoring its perpetrators, and will impose further needless harm in coming months through further real wage reductions, and quite likely an economic recession.’
Profits grow while inflation’s victims suffer
This story is far from limited to Australia and is being played out across the world. As workers struggle to cover skyrocketing costs, energy companies and big businesses post record-breaking profits. Workers not be taken for fools by their employers and governments, and should continue the fight for higher wages and a share of the profits which they generate, at the expense of greedy owners and investors. Läs mer…

Gas price brake, rent cap & tax-free food: Spain most successful in fighting inflation in the EU

Publicerad denFörfattareKontrast.at

Spain has the lowest inflation rate in the EU. What are the Spanish under Prime Minister Pedro Sánchez doing differently—and better? First and foremost, gas price caps and the rent brake are curbing prices. Next year, they will go one step further: VAT on basic foodstuffs will fall, making food cheaper in one fell swoop.
Left-ruled Spain now announced, at the end of December, the third major anti-inflation aid package this year to relieve the Spanish population from inflation. This package includes 10 billion euros, bringing the total amount that the government of Pedro Sánchez (of the socialist PSOE) has put in place since the beginning of the year to cushion inflation to 45 billion euros.
First, the aid package includes a one-time payment of 200 euros for about 4.2 million low-income households (up to about 27,000 euros) and an extension of tax cuts on energy bills for the first half of next year. In addition, all pensions are to be increased by 8.5 percent, and particularly low pensions by as much as 15 percent.
Success in Spain: lower electricity prices and the lowest inflation rate in the EU
There has already been direct aid, concessions on loans and price brakes: rents in the country may increase by a maximum of two percent per year. According to Sanchez, the aim is to ensure that aid reaches those who really need it.
In particular, the gas price brake, which Spain and Portugal were the first in Europe to introduce in May, proved to be an effective intervention to curb prices. Compared with November last year, electricity prices fell by over 22 percent. The gas price brake is in place for 12 months and ensures that gas costs a maximum of 50 euros per megawatt hour. By comparison, wholesale gas prices peaked at 1,000 euros per MWh in the summer.
Inflation over the past 12 months slowed to 6.7 percent in November. It is the lowest rate of the 27 EU member states.
Spain has the lowest inflation rate in the EU (photo: Eurostat)
Bread and milk tax-free: Sánchez government will reduce food prices
Currently, food prices are a thorn in the sight of the population, but also of the government. This is because they have risen by 15 percent compared with the fall of last year.
That’s why Spain’s government announced that it will reduce VAT next year on staple foods such as bread, cheese, milk, fruit and vegetables, and cereals from 4 percent to 0 percent. For pasta and cooking oils, the VAT will be cut in half to 5 percent, he said.
Sánchez also said he would extend subsidies for train commuters for another year and further limit rent increases.
However, the reduction in the price of gasoline for consumers:inside, except the transport industry, will be discontinued.
The result of the left-wing government’s policies: economic growth in Spain was more than 5 percent in 2022 and therefore even exceeded government forecasts. The country will be able to avoid a recession next year.
This work is licensed under the Creative Common License. It can be republished for free, either translated or in the original language. In both cases, please cite / Kathrin Glösel as the original source/author and set a link to this article on Scoop.me. https://scoop.me/spain-inflation/
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