Source : THE AGE NEWS
In Australia, profits make for bad publicity. This is no surprise given our penchant for tall poppy syndrome, in which successful individuals face resentment and criticism.
From our sportspeople to politicians and business magnates like Gina Rinehart, Australians have perfected the art of cutting down those who rise above the crowd.
Corporate heavyweights such as Qantas and Coles cop a lot of heat for reporting healthy profits.Credit: Aresna Villanueva
This cultural trait extends beyond individuals to businesses, what we might call “tall profits syndrome”, in which any company reporting healthy profits instantly becomes a target for criticism and accusations of unethical behaviour.
“Tall profits syndrome can inhibit innovation and discourage ambition,” says Rachel Waterhouse, chief executive of the Australian Shareholders’ Association.
“Profit growth is a foundation of a strong and sustainable economy. It enables companies to reinvest in innovation, create, and sustain jobs, and drive national economic development.”
With another ASX reporting season just a few weeks away, and coming right before a federal election, you can imagine a few chief executives are sweating over the prospect of reporting profit growth for fear they’ll become scapegoats for populist politicians or bad publicity in the media.
It pains me to point out that profitable companies contribute to government revenue through taxes, which fund essential public services.
It’s almost as if, in Australia, business success is inherently bad, rather than something to celebrate, a contrast I couldn’t help but notice after a year living in New York.
“If you have a sports car in New York people will congratulate you, but in Australia they would key the car,” observed an Australian expat I met who ran a small cafe in Lower Manhattan.
Recently, leaders from major Australian corporations including Coles, Wesfarmers and Commonwealth Bank have highlighted how “profit” has become a dirty word.
Take Coles as an example: despite making less than 3¢ profit on every dollar spent by shoppers and maintaining stable profit margins for five years while employing over 120,000 Australians, the company faced intense criticism for reporting “billion-dollar profits”.
This narrative ignores the fundamental role of growing profits in sustaining businesses and driving economic growth – lost in the discourse due to unfortunate, but rare, scandals.
“The perception that profits are inherently negative often stems from historical and cultural contexts where profit-seeking was associated with exploitative practices, unsafe conditions, or environmental harm,” says Waterhouse.
Notes economist Saul Eslake: “Corporate profits have done much better in the US than Australia, up 11 per cent over the past two years, while in Australia they are down 22 per cent. Over the same period, productivity in the US private sector has risen by 2.1 per cent, but fallen by 0.4 per cent in Australia.”
Labour productivity is generally higher in the private sector, making the sector’s growth key to pulling us out of our economic malaise.
Private sector employment has stalled since 2022, with the public sector accounting for 87 per cent of all new jobs in the past two years as Australia experiences one of its longest per capita recessions.
It pains me to point out that profitable companies contribute significantly to government revenue through taxes, which fund essential public services like healthcare, education and infrastructure. For instance, the tax revenue collected from the mining sector is offsetting the cost of one NDIS (for now).
Australians love an underdog story, and right now, there is no greater underdog than the Australian private sector economy. To pull ourselves out of this malaise, as even Treasurer Jim Chalmers has admitted, we need to reframe and celebrate profit growth.
You can expect to see lots of negative media headlines over the next few weeks lamenting “billion-dollar profits”, but we can’t create jobs, pay higher wages, secure our retirements, and pay for our soaring public spending without a strong private sector in which businesses are profitable.
Tall profits syndrome is lethal to entrepreneurship, toxic to innovation, stifles productivity, and is anti-growth. I don’t say this often, but let’s try to be more like the Americans, and celebrate business success.
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