Eight months later and 123 submissions after, the Productivity Commission’s draft report says regulatory reforms are needed for the Australian retail industry to adapt successfully to the globally competitive market

The draft report – Economic Structure and Performance of the Australian Retail Industry – examines the implications of globalisation for the retail industry and the appropriateness of current policy settings.

The Commission has proposed that regulatory reforms are needed for planning, zoning and trading hour laws, which it says “hampers the ability of retailers to respond to changing consumer preferences”. Workplace relation policies also need to be reviewed as the report say it may impede retailers in improving their productivity and lifting customer service levels.

Commissioner Philip Weickhardt said intensified retail competition is good for consumers, but it is challenging for a retail industry that has lower levels of productivity when compared internationally.

“However the Government's role is not to shield the industry from competition but to remove constraints which restrict the industry in responding to this heightened level of competition,” he said.

The current exemption from GST and duty for imports valued below $1000 (the low value threshold) is judged by the Commission to be only a minor contributing factor to online offshore purchases by consumers, which have grown rapidly but are still a small share of retail sales.

“Nonetheless, for reasons of tax neutrality, the level of the low value threshold should be reduced, but only once this can be done cost-effectively,” Weickhardt said.

Under the existing processing systems for incoming parcels the costs to process the extra parcels would far exceed the additional revenue raised.
The Commission is proposing that the Australian Government establish a task force to investigate lower cost approaches to processing in both the mail and courier systems, with a reporting deadline in 2012.

The Australian Retailers Association (ARA), the Australian National Retailers Association (ANRA) and the Australian Sporting Goods Association (ASGA) have welcomed the Commission’s report saying that the draft reflects a number of issues that were raised by both associations in their submissions including the GST-threshold, trading hours and the imbalance of power between landlords and retailer.

At the same time, the National Retail Association’s (NRA) Gary Black emphasises that the Commission clearly faces a choice between securing Australian jobs and giving a taxpayer-subsidised handout to overseas retailers and international shipping companies.

“Do we, as a nation, want to support Amazon.com and international courier companies, or do we want to support the local bookshop that will be able to give our kids jobs when they are putting themselves through university?” he said.

Additionally, the report also indicates that Australia lags to a number of comparable countries in its development of online retailing. The Commission's estimates that online retailing represents 6 per cent of total Australian retail sales – made up of 4 per cent domestic online ($8.4 billion) and 2 per cent from overseas ($4.2 billion).

PayPal and eBay said they will continue to help traditional retailers embrace online retailing

“Today’s report clearly highlights the opportunities available to Australian bricks and mortar retailers that embrace online. As an online payments solution for over 40,000 local businesses, we know that when retailers are equipped with both the tools and knowledge to establish an online presence, they have been able to successfully tap the phenomenal growth in this sector,” Frerk-Malte Feller, managing director for PayPal Australia, said.