With more local retailers finding it tough to compete against international competitors in the online realm, the federal government has announced the Productivity Commission will launch an inquiry into the future of Australian retail.

The inquiry will focus on cracking down on “people or businesses rorting the $1,000 low-value threshold”.

The Assistant Treasurer Bill Shorten released the Terms of Reference for the Productivity Commission inquiry, which will report to the Government and industry in 2011 on the implications of globalisation on the Australian retail sector.

"With retail one of the largest employers in the country, and with ABS statistics showing retail turnover in Australia for the 12 months to October was $242 billion, this Government recognises how important the sector is to Australia's future and wants to ensure the sector continues to flourish for the next quarter of a century," he said.

The Commission will examine the current structure, performance and efficiency of the retail sector and the drivers of structural change in the industry, including globalisation, increasing household and business access to the digital economy, changing cost structures, employment issues and the exchange rate.

It will also consider the broader issues posed by an increase in online purchasing by Australian consumers and the role online purchasing plays in providing consumers with greater choice, access and convenience. The sustainability and appropriateness of the current indirect tax arrangements in this environment will also be considered.

Additionally, Minister for Home Affairs, Brendan O'Connor said the government will launch a compliance campaign to ensure GST and customs duty concession for imports with a value of $1,000 or less are not being abused or exploited.