Australia’s inconsistent state and territory regulations are imposing a growing economic penalty, with new modelling showing regulatory fragmentation will wipe $26 billion from national GDP over the next decade and add more than $9 billion to Australians in household costs.
The new Australian Retail Council (ARC) report, The Fragmentation Tax, prepared with Mandala, exposes the hidden tax on businesses and households, acting as a persistent drag on productivity, investment and consumer prices.
ARC CEO, Chris Rodwell said regulatory inconsistency is inflating costs across the economy.
“Retailers operating interstate are forced to run parallel compliance systems, fragmented logistics models and jurisdiction-specific supply chains,” he said. “Businesses are spending more time and money navigating different rules when they could be investing in jobs, innovation and growth.”
The report highlights transport and logistics, and environment and waste regulation as major sources of avoidable cost. Fragmented heavy vehicle standards, accreditation regimes, duplicate fatigue management rules, delivery curfews, container deposit schemes, and single-use plastics rules are collectively costing the economy hundreds of millions of dollars annually.
“The good news is there are obvious solutions and significant financial upside for all Australians if we seize the moment and tackle the problem,” said Mr Rodwell.
ARC Chief Economist and Chief Policy Officer, Glenn Fahey said unless governments tackle these inefficiencies, unnecessary price pressures will persist.
“Right now, a truck carrying a legal load in Sydney can be forced to stop at the border and transfer that load onto a different vehicle simply to continue to Brisbane. Retailers are sourcing different packaging and coffee cups for different states. Delivery schedules are dictated by mismatched local rules and different council curfews,” he said. “This friction ultimately ends up in the price on the shelf that every Australian pays.”
The compliance burden from Commonwealth regulation alone has ballooned to more than $160 billion annually, up from just $65 billion a decade ago. When state and territory requirements are layered on top, the total regulatory compliance burden approaches $240 billion per year. For a nationally operating sector like retail, fragmentation is a powerful handbrake on productivity.
The report makes three key recommendations:
- Allocate $260M of the National Productivity Fund to create a dedicated retail harmonisation incentive scheme
- Establish a National Harmonisation Council to drive cross-jurisdiction decisions and delivery
- Deliver the first harmonised regulatory package within 12 months
Mr Rodwell said the report identifies practical, achievable steps governments can take within the year to begin harmonising regulation.
“This has been done before and we can do it again. Our action plan draws directly from the National Competition Policy reforms of the 1990s. Those reforms added 2.5 per cent to GDP and $5,000 to household incomes,” he said. “The blueprint exists. What’s required now is political commitment.”
Partner at Mandala, Dr Adam Triggs, said the modelling demonstrates that retail productivity is not just a sectoral issue but a whole-of-economy priority.
“The retail sector sits at the centre of Australia’s supply chains and consumer economy. Our modelling shows that even a modest productivity improvement in retail transmits benefits across every sector – from healthcare and manufacturing through to construction and education,” Dr Triggs said. “Fragmentation costs aren’t always visible, but they’re real. They show up in duplicate compliance systems, in trucks running under capacity across state borders, and in the administrative burden of navigating different rules for the same product in different states. Removing these costs is one of the most direct levers governments can use to ease cost of living pressures.”
For more information and to see the full report:
https://www.retail.org.au/the-cost-of-regulatory-fragmentation-in-retail
E media@retail.org.au P 0434 381 670