Strange economics from vested interests and ideologues

Note to balanced politicians and policy makers: Don’t listen to vested big business representatives: they want domination not competition.  End note.

Note to politicians biased towards the biggest unions, the duopoly or failed ideology: Please resign. End note.

Some big businesses and governments believe if we extend shopping hours and create public holidays the economy will grow and unemployment will almost disappear. How does that work?

There is one thing the small business community is often lectured on by textbook academics/economists  – and that is about the economy and how it functions. 

Yawn.

A lot of textbook economists, big business representatives and shallow policy makers seem to see the word ‘small’ when dealing with small business associations and assume that means small minds or small really means dumb and uninformed.

This reflects the aristocratic and paternalistic attitudes of the ruling class; indeed we do understand the business community better than most because we live right in the middle of it whereas the others live in ivory towers.

So let’s investigate some of the false claims made by various ideologues and big business representatives.

The Victorian government recently created two extra public holidays, one for Easter Sunday and one for the eve of the AFL grand final.

The justification? It seems that the grand final eve public holiday would bring in an extra $300 million to the local economy, according to the government.

But then the Australian Industry Group, the Victorian Employers’ Chamber of Commerce and Industry and Deloitte did some modeling that showed there would actually be a loss of between $900 million and $1.5 billion. But the Victorian government is adamant about their figures.

How does a public holiday create wealth? Penalty rates are higher on a public holiday for businesses that open. Businesses that normally open but now have to close on that day still have to pay wages and they get no productivity or return. Yet the government says the economy will be better off due to the tourism created by the AFL grand final.

If that were so than we could have an economy in Victoria that is booming just by declaring more public holidays every time there is a big football game or any event that attracts spectators; tennis, NRL, ARL, musicals, etc. Why are we missing out on these endless opportunities to grow the economy through public holidays?

Another example is where the biggest retailers and the biggest retail landlords are trying to extend opening hours for their huge malls and shops in Western Australia and Queensland. This is being resisted by smaller businesses that open outside the normal trading hours or who don’t want to open on Sundays. 

The big end of town economists, supporters of the duopoly and big landlords have come up with a fanciful story that, in Western Australia for example, if opening hours are extended then 20,000 new jobs will be created. How?

They must be assuming that out of nowhere consumers will have more money and will spend that in their shops and malls. So, if the opening hours are extended demand will increase and people will have more money?

The 20,000 new jobs will equate to say $300 per job per week, which is $312 million per year. Assuming a return of 12% on sales after cost of goods and cost of sales, then to get back the $312 million there has to be extra sales of around $2.5 billion per year. 

So if shopping centre hours were extended somehow, magically it would seem, the consumers of Western Australia will have extra money; extraordinary economic modelling. It also means the growth in sales would all happen on Saturday afternoon and Sunday, that is an extra $3000 worth of extra sales made on those times per employee – how?

Another example is in the CBD of Canberra where the Queensland Investment Corporation (QIC) owns and runs the huge shopping mall – the Canberra Centre – and the QIC want to almost double its size. 

The local businesses complained this would destroy businesses outside the mall. The QIC commissioned a study and unsurprisingly the (not independent) study showed that if they expanded the centre it would create 200 new business opportunities and 2500 jobs. 

But there was no mention of how many businesses would have to close and move into the mall – I predict 200 – and how many jobs would be lost in those businesses – I predict 3000.

The corporation also made the statement that any business outside the mall that closed would be a direct result of bad management not the growth of the mall. 

Of course, this is rubbish but it does beg the question; if shops outside the mall close because of bad management why do shops inside the mall close? And plenty do. Must be because of bad mall management. Or appalling lease requirements. Or maybe the QIC/Canberra Centre is just making things up to suit its own vested purposes?

So if we listen to the interests of some big business and far-left or far-right wing ideologues we can have a healthy buoyant economy by declaring one public holiday per week and opening large shopping malls across the nation that trade 24/7. As a result jobs will rain upon us, unemployment will disappear, productivity will go through the roof and our GDP will be the envy of the world – not.

The lesson here is to ignore dominant big business and their supporters and take notice of reality.

Let’s listen to common sense not common greed and vested interests.

The same people who believe public holidays and extended shopping hours will save the economy also believe the effects test in competition is not needed – and that pigs fly.

Peter Strong is executive director of the Council of Small Business in Australia.