Business NZ commissioned a report from economic consultancy Sense Partners on greedflation in New Zealand. Photo: RNZ
Inflated company profit margins, so-called greedflation, have not been a significant factor in driving up consumer prices, according to a new report.
Business NZ - a industry advocacy group - commissioned the report from economic consultancy Sense Partners, which concluded that input costs such as materials have been the major drivers of inflation.
The report said 75 percent of inflation for non-financial businesses over the past three years had been inputs with the balance evenly split between wages and profits.
"The data available to us shows that recent inflation in New Zealand has been largely driven by input costs, not wages or increasing profit margins," the Sense Partners report said.
Business NZ director of advocacy Catherine Beard said the report was commissioned amid the growing debate overseas about greedflation, but a lack of local information.
"It's clear that input prices are a much larger driver of output prices than profits are," Beard said.
"Our members tell us the cost of doing business has increased - in fact some sectors are making less and even entering negative-profit territory."
The report used Stats NZ data based on the industry sector groups used in calculating growth - gross domestic product - but excluded the financial sector, which Sense Partners said required different numbers and more complex analysis.
Overall, the report said prices had risen 14 percent for the surveyed sectors between 2019 and 2022.
It said average profit margins last year were 12.7 percent compared to 14.7 percent before Covid-19.
However, there were some wide variations between industry groups with wage costs accounting for more than 20 percent of the price rises for the arts, education, health and professional services sectors, while the same sized profit increases were seen in the IT, real estate, mining, transport and utilities industries.
"International experiences of increasing profit margins through increased mark-ups are not well supported in the New Zealand experience. This indicates caution in importing international narratives without local context," the report said.