What if they gave a recession and nobody came?

I have the sneaking suspicion that Canberra hasn’t the faintest clue about what is really happening out there in Australia’s suburbs and regional towns. This is because our leaders, those who provide them with advice, and those who commentate on them are yet to come to grips with the fact that three quarters of the Australian economy works in the services sector.

We’ve been mining and farming this country since the 18th Century and manufacturing since the gold-rush. And we’ve been governing to suit those industries since Elizabeth Macarthur first stabbed a clean ledger book with her quill and some poor broken-hearted pickpocket stubbed his toe on a lump of coal at Newcastle.

Over those years our institutional infrastructure - the way we govern ourselves - developed to serve these industries.  And we got an early taste of how government would treat neo-liberal service-sector entrepreneurs when the rum-trade was efficiently stamped out. 

Thus we’ve neatly arranged our Parliaments with the owners of capital in mining, farming and manufacturing on one side and the labour serving those sectors on the other.  And around them we’ve built massive, self-serving institutional edifices in bureaucracy, academia, unions, lobby groups and media.  On a constant, self-supporting feedback loop, they measure our national economic health by our success in digging up, chopping down and making things.

And that’s the way bureaucrats, in particular, like it.  You see, they’re scared of what they can’t measure, of what they can’t “drop on their toe”.  The services economy is an anathema to them.  Sure there’s some diligent and heretical converts to the new reality whispering away in scared little groups in Industry House.  But at the Holy See of Treasury and Finance, the service-sector devotees are treated like primitive lost souls when the Inquisition of the budget razor gang rocks around.

Thus, under the Howard Government any purveyor of an industrial or agricultural process that could cobble-together a submission including the words “export” and “research and development” would be showered with taxpayer dollars from a bottomless well of generous innovation funds.  Meanwhile good ideas in the services sector had to scrabble around in the sock-drawer of the EMDGS scheme for loose change.  Unfortunately, nothing much has changed. 

Consider my perennial favorite, the Australian Tax Office.  Two years ago the ATO bought down a GST ruling on deposits.  Fair enough.  However, the ATO later admitted they forgot - forgot¬ - to consult the services sector. There were consequential cash-flow and red-tape nightmares for SMEs who operate on high turnover but small margins. 

Then there’s the Rudd Government’s “Award Modernisation”.  This might work fine on the factory floor; however it is causing much angst in industries such as tourism and hospitality where seasonality and irregular work hours rule. 

Some MPs are seeing the light and championing the service economy’s cause to a foot-dragging public service. But for every Craig Emerson or Steve Ciobo, there’s Barnaby Joyce, who recently said:

We are not going to be able to sustain ourselves in the long term through service industries, that is the economic form of trying to make a living by taking in someone else’s washing

Obviously Barnaby’s forgotten that education and tourism exports are worth more than all his precious agricultural exports combined and without tourism many country towns would fall over.

However, nowhere was our institutional blindness to services more obvious than the shock we saw recently when it emerged, contrary to many learned opinions, that retail sales went up, jobs were continuing to be created and people were still travelling.

Maybe it’s the cash economy – a factor that nobody is talking about and which may be seriously underestimated.  The GST was meant to clean-up the cash economy but anyone living in a service and housing-construction based region might argue the opposite. And, if bureaucrats have enough trouble measuring the circulation of cash in the official services economy then they’ve got no hope in the unofficial one.

And one thing’s for certain, if the PM and the Treasurer continue to draw an artificial line between “rich” and “poor” at $150,000, then the cash economy will continue to grow, and economists and their ilk will continue to receive a few more shocks.  And those of us who believe that people are free, liberal, independent and intelligent beings rather than predictable economic algorithms, would argue that that’s not a bad thing.   

Matt Hingerty’s opinions are his own and not of his employer and he would also like to point out that he pays all his taxes – so there.