I agree with Australia’s retailers and the Productivity Commission that imported internet purchases valued at less than $1,000 should be subject to GST. But I only agree in-principle.
The trouble is, as the Productivity Commission’s report on retailing released last week shows, the administrative effort required to levy the GST would cost more than the tax would raise in revenue.
But the GST is really just a distraction – the underlying malaise of Australia’s retail sector runs far deeper. The Commission says retailers operate under several regulatory regimes that reduce their competitiveness. It nominates three major restrictions which require improvement:
Planning and zoning regulations which are complex, excessively prescriptive and often exclusionary
Trading hours regulations (in some States) which interfere with the industry’s ability to adapt and compete in a more globalised market
Constraints on workplace flexibility such as obstacles to the greater use of enterprise bargaining and the adoption of best practice productivity measures
Retail hasn’t historically been trade-exposed, so it hasn’t had to work hard at being competitive. Up until now, international suppliers have even been able to practice blatant price discrimination. But the internet has changed the game. Consumers can now compare what they’re paying for many products locally with what it costs to import them from overseas markets.
The impact of planning regulations on the viability of domestic retailing is of course of particular interest to The Melbourne Urbanist. The Commission notes that the ability to maintain a competitive and healthy retail sector is vitally dependent on the ability of new retail formats to gain entry to Activity Centres. A number of studies have shown that preventing the development of new retail formats lowers productivity, reduces employment and raises prices to consumers.
The Commission finds a number of barriers to entry, including limits on the size and scope of centres, prescriptive planning requirements and excessive scope for firms to establish local monopolies and maintain them by excluding new entrants, either with the implicit cooperation of planning agencies or through the courts. The Commission recommends that:
Activity Centres should be large enough in terms of total retail floor space and broad enough in terms of allowable uses to facilitate new retail formats locating in existing business zones
Prescriptive planning requirements should be significantly reduced to ensure competition is not needlessly restricted
The impact of new entrants on the viability of existing retail businesses should not be considered at any stage in the rezoning or development assessment process. This issue should only be considered at the strategic planning stage
The focus should shift to “as-of-right” development processes to reduce uncertainty and minimise the scope for gaming of the system by commercial rivals
Courts should be able to award costs against parties who are found to be appealing for non planning reasons
It’s interesting and illuminating to read the Commission’s report and at the same time look at what the City of Darebin is proposing in this report for the future development of Northland, a “hard-top” shopping centre (mall) with nearby “big-box” retail facilities at Preston, about 11 km north of Melbourne’s CBD. The exhibit above shows Council’s proposed vision for the centre and surrounding uses.
Astonishingly, there’s little of substance in Council’s report about Northland’s function as a place for selling and buying goods and services, much less anything about trends in retailing and the opportunities and/or problems this might present. But what’s perhaps most bizarre is the fate of precinct No. 3, the existing Homemaker Centre opposite the hard-top, which currently accommodates a range of mostly ‘big box’ or ‘category killer’ furniture stores set around a central car park.
Council’s vision does not include any space for large format retailing. It simply ignores consumers’ evident interest in this form of retailing which, as the Productivity Commission points out, has been the primary direction of retailing change over the last twenty years. In fact without any assessment or even apparent awareness of what the consequences might be, Council envisages the existing Homemaker Centre will simply disappear and be replaced by a mixed use precinct with retail, office and higher density housing. Council even foresees (page 14) the existing Bunnings’ site could be redeveloped in the future with “a greater mix of land uses”.
Council’s vision shows the ascendency of “urban design” over more prosaic matters like the economic and social welfare of the community. It’s not that the former doesn’t matter – it does – the problem is this sort of jejeune “designer” vision isn’t underpinned by any economic or social analysis, or a genuine appreciation of real people’s lives or preferences.
Planners and policy-makers should understand that their policies usually also have implications for mundane things like jobs, prices and consumer choice.
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