Costs inflated by red tape: Productivity Commission report

Retail groups have called for immediate action by all Australian governments after a new Productivity Commission report released last Friday found that – while largely market driven – retailers’ costs are being inflated by ‘red tape’, such as trading hours restrictions, planning and zoning regulations and occupancy costs.

Productivity Commissioner Patricia Scott said that the retail trading hours of bricks and mortar retailers are increasingly out of step with consumer expectations and the rapid growth of online retailing.

Peak retail industry body the ARA said that the Productivity Commission’s ‘Relative Cost of Doing Business’ report highlighted several areas requiring immediate Government attention, including occupancy costs and deregulation of trading hours.

ARA executive director Russell Zimmerman’s view is that labour costs and rent as a share of revenue are much higher in Australia than in the UK and the USA.

“There needs to be an open and honest conversation within the industry about the impact of trading hours on retail businesses. The Productivity Commission report noted many industry comments regarding retailers’ reluctance and inability to open their stores on a Sunday due to the impact of penalty rates and crippling costs of labour,” Mr Zimmerman said.

“Occupancy cost ratios as a share of sales revenue are also higher here in Australia than in the UK, USA and Europe. We urgently need to look at zoning and planning as well as accessibility to information for retailers regarding rents.”

In relative terms, rent as a share of revenue is higher in Australia than the UK and USA, while other costs have also risen; including electricity (36%), insurance (34%), air-conditioning (21%), cleaning (19%) and repairs and maintenance (13%).

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