Last month's Productivity Commission report on the retail industry came when the industry is under increasing pressure. Sales, especially household goods and clothing, are sharply down over the past six months.
This tailspin in demand stems from economic uncertainties created by perilous global economic conditions. But these have been exacerbated by the Federal Government introducing wealth-sapping avalanches of costs and regulations that reduce efficiency and undermine the ability of business to operate profitably.
Economy-wide, these include the carbon tax, government debt-financed spending on school halls and green power, a $44 billion white elephant telecommunications network, industrial relations measures that restore workplace control to unions, taking water off irrigators, preventing cattle exports to Indonesia and yet another forest accord to stifle Tasmanian business.
Instead of oiling the engine of commerce, the Government is throwing buckets of sand into it. Productivity is lagging across the economy and jobs are being shed.
Australian retailing is ill-equipped to deal with consequent lacklustre demand. The PC report shows this is because regulations have forced up labour costs, increased rents and disadvantaged Australian shops by exempting online sales from the GST and import duties.
Labour accounts for 70 per cent of retail costs and labour productivity in Australian retailing is 20 to 30 per cent lower than in the US and France. Our productivity improved once shopping hours were largely deregulated. But regulations covering penalty rates, minimum hours and the use of casuals are reducing gains.
Shops also face excessive rental costs as a result of planning regulations. These barriers to shopping centre developments thereby suppressing competition, which is crucial to keeping prices low. At the least, new centres require lengthy planning negotiations. And, once a shopping centre has been approved, its owners lobby aggressively to prevent rivals.
The release of surplus Commonwealth airport land allowed a valuable injection of new retail competition since the land was not subject to state planning restraints and was well served by roads. This brought the development of ''factory outlet'' centres but entrants such as Aldi and Woolies' Masters hardware are finding costly barriers to rolling out new stores.
Unquestionably the growth of online sales is a major factor in the retail sector's malaise. Although online sales account for only 8 per cent of goods, this share is concentrated in clothing and footwear and is rising.
Online purchases are mainly exempt from import duties and GST, an arrangement the Financial Services Minister, Bill Shorten, wants to retain in order to avoid collection costs. This reason offers cold comfort for local businesses. It also makes little sense since Amazon has shown the way to providing goods that fully meet the tax laws of the 50 countries it supplies.
Online sales will doubtless increase but local retailers should not face discriminatory taxes on their goods.
In addition, deregulation of labour is essential to allow shops the flexibility to meet customers' needs and costly planning restraints must be eased.
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