How’s this for a novel approach to industry policy?
Acme Products is unhappy that a lot of people who used to buy at Acme are now buying at Ajax Products, which is located in a different part of town. So Acme gets some lobbyists to approach the government to ask that the government force people to travel to where it is located — and force them to pay the cost of that travel — so that more people will buy Acme instead of Ajax.
Better yet, they get friendly journalists to write up stories about how terrible it is that people aren’t coming to Acme anymore, and why they should be forced to.
You might think Acme would get ridiculed for its demands. But in Australia, where state capture and influence-peddling are standard features of public policy, it gets taken seriously.
In today’s Sydney Morning Herald, under a headline “City businesses face ‘financial ruin’ unless workers return to CBD”, Acme — aka Business Sydney, independent state MP Alex Greenwich, and a hairdresser who thinks people not coming to his salon are “being lazy” — gets an entire article to call for the state government to force public servants to return to their offices and to hand out taxpayer-funded vouchers to encourage people to spend in the Sydney CBD.
(At the same time, the Victorian government is ending its working from home rules, with Victorian businesses claiming it will be a big boost for “business precincts”).
What’s bizarre about the demands to force “lazy” workers back to the office, where they can presumably pop up for a cut and blow-dry at lunchtime, is that, nationally, retail sales to July have grown strongly compared to 2021 — by 16.5%. Much of that is inflation, true, but it’s also occurred despite the Reserve Bank hiking rates multiple times. And NSW retail sales have grown at a significantly higher clip than nationally (as they have in Victoria).
But isn’t that persistent strength in retail sales all just people ordering online and not going out while they “laze” at home working from under the doona? Well, café and restaurant turnover has grown by more than 21% since January (and by 5% since May when the RBA began hiking rates). It seems that for every small café struggling with foot traffic, there must be another one going gangbusters.
That is, the overall level of spending in the economy remains buoyant — too buoyant, monetary policy hawks would insist. There is no sign whatsoever that people working from home — which is now, whether the Property Council and Business Sydney like it or not, a permanent feature of employment — is affecting overall demand. What’s happening is spending is occurring outside CBDs, in local shops and online. They’re spending more where they live, compared to where they work, or they’re spending on the internet.
So Ajax is doing well.
Ajax wouldn’t do so well if Acme had its way and the state government forced every public service to return to work and handed out free money for people to spend in CBD shops. That would transfer sales from Ajax to Acme. But Ajax isn’t as well organised as Acme. There’s no chamber of suburban businesses that can get its calls returned by ministers like Business Sydney can. There’s no lobby group for local cafes where you do a mid-morning coffee run on your work-from-home day.
But you can’t blame Acme for trying. We know that rent-seeking and influence-peddling are hallmarks of the way Australian business conducts itself. And to the louder and the more powerful, usually, go the spoils.
