Analysis by the Australia Institute's Centre for Future Work reveals businesses have bolstered prices well above elevated expenses for labour, materials and other inputs and contributed much more to inflation than wages.
The inflation rate hit 7.8 per cent in the December quarter, with surging inflation prompting nine interest rate rises from the Reserve Bank to take demand out of the economy.
But the research from the think tank's Jim Stanford found inflation would still be within the RBA's target band of two to three per cent if Australian firms weren't making excess profits for goods and services.
"Australian Bureau of Statistics data shows that without excess price hikes through the pandemic, inflation would likely be within the RBA target band," Dr Stanford said.
"And hence there would be no need for the nine extreme, back-to-back interest rate rises that are crushing households and mortgage holders, fuelling the cost-of-living crisis."
The analysis comes as major Australian airlines, supermarkets, banks, gas and petrol companies post strong half-yearly profits.
The fresh research found the excess expansion of profits per unit of production accounts for around 70 per cent of the acceleration in inflation beyond the RBA's target range.
Growth in wages bills above normal levels has accounted for only 18 per cent of the acceleration in inflation.
Australian Council of Trade Unions secretary Sally McManus said wage growth was clearly not contributing to inflation and urged big companies to drop their prices and moderate their profit expectations.
Official data showed wages growing by 3.3 per cent in the December quarter, amounting to a 4.5 per cent gap between inflation and wage growth.
"Supermarkets and big business are putting prices up more than they need to, and workers are feeling the pain," she said.
RBA Governor Philip Lowe has warned about the unlikely but disastrous consequences of a wage-price spiral, which is where increasing prices drive wages higher which in turn pushes prices higher again.
In his statement accompanying the February interest rate decision, he noted the importance of avoiding a "prices-wages spiral" and said the RBA board would pay close attention to both labour costs and the price-setting behaviour of firms.
Commenting on the softer-than-expected December quarter wage data, St George senior economist Pat Bustamante said Australia's wage growth tends to be less responsive to labour market conditions than in other developed countries.
About two-thirds of wages are set by enterprise agreements or awards, which take time to expire, renegotiate and update.
"This is a key difference when compared to other OECD countries, which may help explain the relative underperformance in wages growth in Australia," Mr Bustamante said.
He said the return of overseas arrivals was starting to improve labour supply and ease acute worker shortages.
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