Dr. Robert Kelly:

This is a very interesting piece. Certainly, services inflation is much more driven by domestic imbalances. It is much more driven by what is happening here. There would be a larger wage component to a lot of that sector, for example. We would have done a piece, and may have even spoken to it at a previous hearing of the committee, where, in 2022, we looked at the composition of what is called domestically generated inflation. We would have seen then that unit profit margins were quite a large component of that. It is important to point out that this is a kind of return of capital, so it would be before taxation or repayment of interest on debt and things like that. It is very important to understand exactly what that is. Then we would have spoken to a point that said that, in our expectation for inflation to be on the downward path we referred to then, we would expect that wage demands and compensation for employees would be absorbed to some degree by these unit profits. We repeated that exercise in the most recent quarterly bulletin and we see in 2023 that while unit profits are contributing to inflation, it is below its historical norm and they are clearly doing a job of absorbing some of what we are seeing, along with increases in labour productivity.