A new corporate parasite is born

By Leith van Onselen

This site has frequently derided the parasitic growth of Australia’s FIRE sector (finance, insurance and real estate), which has grown at roughly twice the pace of the rest of the economy since financial markets were deregulated in the mid-1980s:

Now it appears there is a new parasite on the block in the form of the Big Four accounting firms. From The ABC:

The “big four” are the unseen hand guiding Australian life.

Not the banks, but the global consulting firms KPMG, Deloitte, PricewaterhouseCoopers (PwC) and Ernst & Young (EY).

Their revenue in Australia topped $7 billion last financial year, and the sector is growing at nearly 15 per cent annually — powered by rampant acquisitions of everything from advertising agencies and marketing companies to law firms.

“The firms are incredibly important in Australia — they’re proportionally larger here than anywhere else,” Stuart Kells, co-author of a new book The Big Four, said.

“And they’ve got fingers in all sorts of pies: corporate auditing, government advice, not-for-profits, real estate, marketing, you name it…

KPMG has “enjoyed almost double digit growth” for the last five years, according to its chairman Alison Kitchen.

“With the economy growing at about 3 per cent during that time, clearly that cannot continue indefinitely or else we’d end up taking over the world”…

“Whilst I don’t think that we are ‘too big to fail’ … I’m sure that the regulators are not going to allow us to get ourselves into that position,” Kitchen said.

One area where the Big Four has made out like bandits is consulting for Australia’s various governments, with the federal government alone understood to have spent $500 million on consultants last year alone, with the Big Four’s fee revenue more than doubling.

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Comments

  1. smart really,
    Scotty loves paying to get a so-called “credible, independant firm”…. to agree with him.
    mates in that space say the best bit is you can run over budget by a mile,….and all good

    • Stephen Morris

      And by the Magic of Economics, the more they are paid, the more they are deemed to have “produced” . . . by definition!

      It’s almost as good as Westconnex.

      No wonder our cities are so “productive“. Just ask Ed Glaeser, or his disciple Peter Martin.

      • No wonder our cities are so “productive“.
        Absolutely! Particularly the inner city segment close to teh government and law making.They ARE the economy. We Don’t need nothin but big inner cities!!!

    • You have to pay real money if you want the world’s best advice, and the BIg4 is where you can get that. None of this half baked stuff that public servants deliver. Besides what would they know – public servants have next to no understanding of the real world, and live in their sheltered workshops.

      We should also outsource our foreign policy formulation to independent research institutes like the Confucius Institute located in our universities.

      jkambah – ex-longterm sheltered workshop inmate

  2. It’s a vicious cycle… outsource everything difficult your department is responsible for, lose the capability to do it internally, lay off staff because they no longer have any capabilities, rely on consultants forever… Martin Parkinson has written about all of this extensively before.

  3. It has got to the stage where work done by the public sector is not being considered by governments and a report from the big 4 is required.

  4. Nothing new here. Let go of your in-house expertise as they tend to produce (politically) inconvenient advice. Outsource externally to “independent” experts to echo what you want to hear.

    • ceteris paribus

      You got it. A lot of good senior public servants think of the public/community as the client. That is no use to pollies. Pollies need advice and actors to serve them. These accountancy behemoths are happy to oblige- they speak the same language of “self-interest”.

  5. reusachtigeMEMBER

    I’ve been told to watch out because there’s a parasite getting around the local relations studios here in Sydney.

  6. If government managers can’t make decisions without the aide of consultants to ‘rubberstamp’ predetermined policies, then we need to review their salaries.

    • Good idea, lets get PWC to conduct a review of public sector management salaries ASAP. deadline is 12 months, at which time they will report back to the special working group on managerial strategies. The working group will consist of managers (who’s salaries are under review), members from the PWC review team and no less than 3 independent working group members, ideally sourced from Deloitte or KPMG. Once the working group outcomes have been decided, so as to avoid any conflicts, EY will be tasked with implementation.

      • The Traveling Wilbur

        You were so close to perfection. You only err’d by omission: and the review will no doubt recommend an increase in the salaries of management to reflect the increase that has occurred in their workload and responsibilities (additional contract management, probity compliance, committee attendances, governance responsibilities and of course an enormous increase in stakeholder engagement commitments and document reviews).

        You couldn’t make this stuff up… because it’s true.

  7. This is largely benign . Once Payne’s military industrial complex is up and running we can look forward to pundits on TV advocating for war and all sorts of mayhem to keep the dollars flowing.
    That will be the ultimate parasite as we lose blood and treasure to the Oligarchs running the place.

  8. It’s no graft; its a government gravy train. Also a ad signal to the employment market too as it ensures plenty of fatuous second degrees in order for people to get hired by those firms.

  9. kiwikarynMEMBER

    Three words. Arthur Anderson – Enron
    For those that remember that the Big 4 used to be the Big 5 🙂