Industry insights & reports
How regulatory inconsistency is costing Australian retailers and households
February 2026 | Australian Retail Council in partnership with Mandala
$26 billion a decade fragmentation tax
How regulatory inconsistency is costing Australian retailers and households
Australia’s retail sector is one of the most systemic parts of our economy. It employs more than 1.5 million Australians, generates $649 billion in income each year, and underpins supply chains in every community across the country.
Yet retailers are being slowed by a patchwork of inconsistent state and territory regulations. This research shows that regulatory fragmentation is now a measurable drag on productivity, jobs and household budgets.
The Fragmentation Tax – How regulatory inconsistency is costing Australian retailers and households
February 2026 | Prepared by Mandala for the Australian Retail Council
The numbers at a glance
Estimated decade lost economic activity from regulatory fragmentation in retail
Annual economic uplift from a 1% productivity gain in retail
10-year cumulative additional cost to Australian households from fragmented regulation
Annual savings to households from a 1% productivity gain
Why this matters?
Australians are facing sustained cost of living pressures. Prices have risen sharply over the past five years while productivity growth remains at its lowest levels in decades. Weak productivity means weaker wage growth and less economic resilience.
Retail sits at the centre of this challenge:
- Retail is the second largest private sector employer in Australia
- It accounts for around 11 per cent of household spending
- It provides one in six jobs for young Australians
If retail productivity improves, the benefits flow directly to households.
The research finds that a 1 per cent uplift in retail productivity would:
- Lift national real GDP by $3.2 billion per year
- Create approximately 13,000 additional jobs across the economy
- Deliver $1.3 billion in annual household savings, equivalent to around $115 per household
For lower income households, the proportional benefit is even greater.
The problem: Regulatory chaos
Australian retailers operate across a complex web of Commonwealth, state, territory and local government rules. While regulation serves important public purposes, inconsistency between jurisdictions creates avoidable cost.
The report distinguishes between:
- Standard regulatory costs that arise from complying with one jurisdiction’s rules
- Fragmentation costs that arise when businesses must comply with different rules in different jurisdictions
It is this second category that represents the “Fragmentation Tax”.
The headline finding
Regulatory fragmentation in retail is costing the economy approximately $2.6 billion per year in lost economic activity. Over the next decade, this equates to around $26 billion in lost productivity and higher prices if left unaddressed.
Households bear a significant share of this burden, with around $940 million per year in additional costs flowing through to consumers.
The opportunity: Unlocking the retail productivity dividend
Regulatory fragmentation is costing the economy $2.6 billion each year. But it also presents one of the clearest reform opportunities available to governments.
Because retail is so deeply embedded across the economy, even modest productivity gains generate outsized national benefits. Addressing fragmentation is therefore not simply a compliance exercise. It is a structural productivity reform with direct cost of living impacts.
A practical path to reform
Addressing regulatory fragmentation should be a national reform priority. The report identifies four practical actions governments can take to reduce unnecessary complexity, improve productivity and deliver cost of living benefits to Australian households.
Use $260 million to support regulatory harmonisation
Governments should increase National Productivity Fund investment by $260 million to support regulatory harmonisation across jurisdictions.
Dedicated funding would enable legislative alignment, system reform and transition support for states and territories. Properly resourcing reform is critical to achieving nationally consistent regulation at a scale comparable to past microeconomic reform programs.
Establish a National Harmonisation Council
A National Harmonisation Council should be established within the National Competition Council to drive cross-jurisdiction decision-making and delivery.
The Council would coordinate mutual recognition arrangements, evaluate the costs of fragmented regulation and provide ongoing national oversight to prevent regulatory divergence over time.
Deliver the first harmonised regulatory package within 12 months
Governments should commit to delivering an initial harmonised regulatory package within 12 months.
Delays in resolving fragmentation impose ongoing costs on businesses and households. Early delivery in priority regulatory areas would demonstrate momentum, provide certainty to industry and establish a clear national harmonisation agenda.
Require Regulatory Impact Statements to assess fragmentation risks
Regulatory Impact Statements should explicitly acknowledge and quantify fragmentation risks.
Embedding fragmentation assessment into regulation-making processes will ensure governments systematically consider cross-jurisdiction impacts and avoid unintentionally increasing regulatory complexity.
What happens next?
This report provides an evidence base for reform. It quantifies the cost of fragmentation and sets out a credible pathway for governments to act.
If Australia is serious about lifting productivity, easing cost of living pressures and supporting employment, retail harmonisation should be a national priority.
The Australian Retail Council will continue working with governments and industry to advance these reforms and unlock the retail productivity dividend.
Note: Economic and employment figures cited within the Mandala report are based on Mandala’s modelling assumptions and ABS datasets current at the time of analysis. The Australian Retail Council’s standard industry statistics used across other ARC materials may differ slightly due to alternative ABS measures and rounding conventions.