When the Productivity Commission releases its inquiry into the state of Australia’s retail industry today, the news is expected to be dire.

Yesterday, horrendous ABS retail figures for June showed a 0.1% slump in shopping for June, despite the usual winter pick-up driven by southern state denizens rushing to buy coats and umbrellas. The year-on-year growth number was just 1.4%, far from the usual 5 or 6%.

The solution to the doom and gloom isn’t clear cut. If only consumers could get their mojo back, market economists maintain, Australia would be back on the golden road to prosperity. The lack of spending is equated not to structural factors or the two-speed economy, but an anti-consumption mental illness.

But amid all the renewed talk of shopping strikes, US recession and Australians’ eagerness to pay off their credit cards on time, the “prosperity without growth” crowd is beginning to arc up. The usual suspects are urging the nation to step off the fraying GDP conveyor belt championed by every Labor leader since the Accord and reject the growth imperative outright.

Forty years ago the Club of Rome warned that world population, industrialisation, pollution, food production and resource depletion would all rub up against an expanding economy in its Malthusian ‘Limits to Growth’ tome. Peak Oil has also started to re-emerge as an issue, forty years after it too was identified.

Now, media-savvy ex-electronics retailer turned cream cheese king Dick Smith reckons he has the answer, blasting out a press release this morning telling retailers to “get used to” sagging bottom lines and embrace the gleaming alternative. “We can have a fantastic free enterprise system which is not based on exponential growth in the use of resources and energy, but we have to plan for it”, Smith explains.

“What we are doing at the present time is complete madness and our economy will end up hitting a wall or going over a cliff.”

Smith reckons there are “still plenty of profits to be made but they won’t come from endless growth in consumption – they will come from smarter management creating efficiencies and saving waste. Yes, this will certainly ‘sort out the men from the boys’, however it’s all possible,” he reckons.

Pressed on his plans, the entrepreneur says he’s talking about reducing working hours — and immigration, which according to the Productivity Commission makes up half of all new growth, to reduce demand. And he says some leading retail figures agree.

“A senior exec at Woolworths told me ‘you are absolutely right’ this madness of growth from more people and more consumption can’t last, we need to become smarter at making more money.”

Last year, Smith offered up a $1 million prize for people under 30 that present him with a coherent alternative (including, presumably, Crikey journalists) to a high-growth economy. Although he doesn’t spell it out in concrete terms this will probably mean embracing something like the Steady State Economy, or a renewed Thoreau-ian urban agrarianism.

“It’s only cancer cells and economists who believe in perpetual growth,” Smith reckons, echoing many of the points made in his Population Puzzle doco for the ABC.

Amid all this lies the opportunity for everyday Australians to actually make money under a carbon tax by turning off their plasmas at the wall, while pocketing the Gillard government’s mass compensation through the tax and transfer system. It’s happened before, when some savvy consumers substituted legumes for Lean Cuisine and used income tax cuts to come out on top when the GST went live.

The carbon tax will only impact marginally on the country’s economic wellbeing, the government assures us. In making their pitch, the overwhelming message is one of business as usual.

University of Queensland economist John Quiggin agrees broadly with Smith’s prognostications. He told Crikey that a low-growth sustainable economy could “easily” be achieved domestically given that Australia’s dominant trade in services, achieved through productivity gains.

“I would call it a mixed economy, there would still be a vibrant economy with plenty of free enterprise. But broadly speaking most of the economy is services and there’s no reason that you can’t improve services without running in to any resource constraint.”

“Obviously if you have to improve output you have to improve productivity.”

Crikey Budget night guru Nicholas Gruen says the carbon tax, in line with Treasury analysis, will bolster low carbon emission consumption:

“It has an income effect which reduces consumption, but the compensation then drives the consumption back up.  That then leaves the substitution effect. The carbon tax induces substitution of low carbon emissions consumption and production for high carbon emissions equivalents.”

But crucially, the continual obsession with getting the economy back on track is actually illusory.

“We could grow faster, for a little while anyway, by belching out more sulphur dioxide or any number of pollutants, or wrecking our river system by robbing rivers of environmental flows, but if you fully account for the costs, then the faster growth option isn’t faster growth because we’re not counting the degradation to our natural capital.”

Still critics maintain that a growing economy can still do it all. The Institute of Public Affairs has consistently argued that increased growth not only lifts the poor out of poverty, but creates the cash necessary for environmental initiatives.

And until the government gives Australia the green light to think otherwise, the consensus will probably hold.