Lower taxes, higher interest, and excess profits are contributing to an increase in inflation, according to recent data. In August, Denmark saw inflation at 2.4 percent, a decrease from the previous month’s 3.1 percent. While this may seem like good news, Sweden is experiencing significantly higher inflation rates, although it is starting to decline.
Statistics Norway’s latest press release states that the Consumer Price Index (CPI) recorded an inflation rate of 9.3 percent in July 2023. Additionally, food prices have begun to rise again, which is concerning for many consumers.
Ulf Mazur, from Matpriskollen, commented on the situation, stating that these price increases are not insignificant and affect several goods. Moreover, it appears that most shops have taken advantage of the situation and raised their prices. For example, a grocery bag that previously cost 1,500 can now exceed 2,000. This price increase raises concerns about affordability.
The situation is particularly challenging for pensioners, as more and more are being affected by rising costs. The Crown Bailiff has reported an 18 percent increase in cases for individuals aged 65 and older. However, the government’s response to this issue has been limited, with no significant actions taken to alleviate the burden on pensioners.
The government’s focus in the upcoming budget is primarily on a new employment tax deduction of 11 billion. While this measure may contribute to keeping inflation high, it could also result in higher interest rates. However, there is a lack of proactive measures to reduce food prices, such as threatening legislation if companies do not improve competition.
Furthermore, while other countries, such as Spain, have introduced excess profit taxation on bank directors, Sweden’s Elisabeth Svantesson has not taken similar action. The state-owned mortgage institution SBAB is also not being utilized to push down banks’ interest margins. Instead, Sweden chooses to rely on the market to resolve these issues, contrary to governments in other countries that are actively proposing special taxes, abolishing VAT on basic goods, providing direct support, and implementing price caps.
The consequences of rampant inflation are significant, as salaries and pensions quickly lose their value. Decades of real wage increases could vanish, leading to widening gaps in society. With the approaching winter, Sweden faces another crisis, and many households have already depleted their savings and margins.
Despite the challenging circumstances, Sweden’s wage earners have held back on wage demands, thus preventing further inflation. However, the same cannot be said for directors and major banks, who have not made similar efforts to curb inflation. “Today’s industry” reported that shareholders in major banks are predicted to receive between 21 and 28 percent direct return over the next three years.
Amidst this crisis, there appears to be no sense of urgency from both the government and major banks. The shareholders’ projected returns suggest a lack of concern about the current situation.
In summary, Sweden is grappling with rising inflation due to lower taxes, higher interest rates, and excess profits. While efforts have been made to control inflation, such as the new employment tax deduction, more comprehensive actions are needed to address rising food prices and ease the burden on pensioners. With the threat of decreased salaries and widening societal gaps, Sweden must take proactive measures to navigate this crisis.