PRODUCTIVITY COMMISSION
NATIONAL INQUIRY INTO ECONOMIC STRUCTURE AND PERFORMANCE OF THE AUSTRALIAN RETAIL INDUSTRY
MR P. WEICKHARDT, Presiding Commissioner
MS L. SYLVAN, Commissioner
TRANSCRIPT OF PROCEEDINGS
AT MELBOURNE ON MONDAY, 5 SEPTEMBER 2011, AT 9.28 AM
Retail 1
re050911.doc
INDEX
Page
AUSTRALIAN RETAILERS ASSOCIATION:
RUSSELL ZIMMERMAN 3- 18
HEATH MICHAEL
SHOP DISTRIBUTIVE AND ALLIED EMPLOYEE
ASSOCIATION:
JOE de BRUYN 19-35
SUE-ANNE BURNLEY
ACTU:
JEFF LAWRENCE 36-56
JOEL FETTER
NATIONAL RETAIL ASSOCIATION:
GARY BLACK 57-81
JOHN WOOD
AUSTRALIAN SPORTING GOODS ASSOCIATION/
FAIR IMPORTS ALLIANCE:
BRAD KITSCHKE 82-97
LINDYS GOODIES:
MIKE LAKER 98-116
LINDY LAKER
5/9/11 Retail 2
MR WEICKHARDT: Good morning and welcome to the public hearings for the Productivity Commission National Inquiry into the Economic Structure and Performance of the Australian Retail Industry. The hearings follow the release of the draft report in early August this year. My name is Philip Weickhardt. I'm the presiding commissioner on this inquiry and my fellow commissioner is Louise Sylvan.
The purpose of this round of hearings is to facilitate public scrutiny of the commission's work and to get comment and feedback on the draft report. Following these hearings in Melbourne on 5 and 6 September, hearings will also be held in Sydney on 12 and 13 September. We will be then working towards completing a final report for government in early November this year, having considered all the evidence presented at the hearings and in submissions, as well as other informal discussions. Participants in the inquiry will automatically receive a copy of the final report once released by government which may be up to 25 parliamentary sitting days after completion.
We like to conduct all hearings in a reasonably informal manner but I remind participants that a full transcript is being taken. For this reason, comments from the floor cannot be taken but at the end of the proceedings for the day I will provide an opportunity for any persons wishing to do so to make a brief presentation. Participants are not required to take an oath but should be truthful in their remarks. Participants are welcome to comment on the issues raised in other submissions. Transcript will be made available to participants and will be available from the commission's web site following the hearings. Submissions are also available on the web site.
Today we have a number of members of media here. Our rules for media are that recordings cannot be made whilst the hearings are in process and filming cannot be made. People are welcome to take notes and clearly they can access a transcript. To comply with the requirements of the Occupational Health and Safety legislation and commonsense, you are advised that in the unlikely event of a fire or an emergency requiring the evacuation of this building, you should follow the green exit signs to the nearest stairwell. Lifts are not to be used. Please follow the instructions of floor wardens at all times. If you believe you would be unable to walk down the stairs, it is important you advise the wardens who will make alternative arrangements for you. Unless otherwise advised, the assembly point for the commission in Melbourne is at the Suncorp Plaza at 447 Collins Street which is between William and Queen Streets.
Our first participant for the day, the Australian Retailers Association, and if you could give your name and the position in which you're appearing please and then give us a brief synopsis of what you'd like to say. Assume we've read your material
5/9/11 Retail 3
but obviously if you'd like to outline that, please go ahead.
MRZIMMERMAN (ARA): Russell Zimmerman, executive director of the Australian Retailers Association. Just for the record, we are an industry body, we represent about 5500 members. Most of our members are from the larger retail chains down to the small retail stores. We probably have predominantly in our membership fashion and footwear retail stores.
MR WEICKHARDT: Your colleague?
MRMICHAEL (ARA): Heath Michael, policy director for the Australian Retailers Association.
MR WEICKHARDT: Thank you.
MRZIMMERMAN (ARA): We would like to start by thanking the commission for the opportunity for being here today and just to highlight some of the points of what we have put into our recent submission letter. We would firstly note the support for the low value import threshold by other groups and industry bodies and we would note to the secretariat of the Fair Imports Alliance that we will address some of those issues that will be also addressed by the Fair Imports Alliance later.
We find ourselves as the ARA in agreement with the SDA Union on the matter of low value imports, in particular the recommendation to the PC to improve the performance and the efficiency of Customs and Australia Post and furthermore, the establishment of the task force to address and rectify the ineffectiveness. That being said, we would like to see the end of industry bodies that are affected also involved in the task force, not just the carriage service, as has been suggested under the Productivity Commission report. We would further like to see the time process for the process for the reduction of the $1000 threshold to be tightened up. We feel that there is a long lag and that there is an opportunity for that to be sped up and to be tightened up.
We further would also note that in the report from the Productivity Commission that they talked about the tightening up of the ABS figures and we would certainly agree and support that. It is worthy noting that in the current retail figures other retailing was listed as being about 7.2percent increase. That being said, other retailing we know includes online retailing but we would also like to see those figures broken down so we have a real true indication of where the online retailing is in relation to the other retailing.
In relation to planning and zoning that has been listed in the Productivity report, we would like to see greater coordination through COAG and an opportunity to work closer with COAG to instigate some of the recommendations. In relation to tenancy in our submission, we feel that there is an unfair market dominance by various tenancy landlords and the ARA will be discussing with the state governments how there can be a more transparent tenancy regulation and we are looking to the federal government to support that so that retailers can have a far more level playing field in their negotiations. We feel at the moment it's very difficult to negotiate. We feel it's very much one-sided by the landlords, and the retailer doesn't have as much opportunity. We feel that if a retailer had more knowledge and information that that would be an opportunity for retailers to be able to negotiate their leases in a far stronger position.
We also believe there needs to be more flexibility in relation to workplace relations. The cost of labour on weekends and public holidays is causing many retailers now to reassess how they run their staff. We had a number of retailers at a meeting on Friday in Sydney, and a number of them were telling us that they are finding now that they have to look towards junior staff for weekends and public holidays due to the inflexibility of arrangements and to the cost of operating those staff. That being said there are some people in the retailer industry who would be very happy to work on weekends and public holidays and yet they are not really looking for higher wages. It would suit their lifestyle to be able to work on weekends but the employer doesn't have the ability to employ them due to the high costs.
Some small-medium retail enterprises, we are being told now, are closing on weekends, particularly in country areas, particularly on Sundays due to the incredible costs of the wages that are needed to be paid by employers to senior full-timers. Retailers are struggling in the online space at the moment. Realistically, if you look at what's happening in the online space, the small to medium retailers really have not had a model to follow. We've even seen some of the larger retailers only just getting involved in the online area and therefore they're struggling to understand what their position is, how they should be in the online space. We see a great need for the retailer industry to have support from government in training, education, through industry bodies such as the ARA to assist these retailers to engage in the online space to ensure that efficiency and productivity remains.
MRWEICKHARDT: Thank you very much indeed for your comments and for your participation in the process of this inquiry so far. You've made a number of comments, first of all, about the low value threshold and I know this has been an issue that a number of people in the industry have been heavily focused on. The commission, after having looked at this issue, made some comments in our report where we said we felt that the issue of tax neutrality was an important principle and yet at the moment it would not be cost-effective to collect the revenue on the vast majority of parcels coming into Australia.
You made a point that this was due to the inefficiency of Customs and Australia Post. I don't think that's a fair characterisation. Their process is quite efficient for the current policy setting. It's if the policy setting were changed that their process would become incapable. I don't think it's fair to criticise them for the way they're operating now. They're operating according to the current government policy requirement. But the point I wanted to come to is that we concluded it would take some time. You're expressing impatience with that time, but we outline the reasons for that; one of the reasons being that our initial impression is that one of the steps that might be made to make the whole process more efficient would be to do, as they have done in Canada and the UK, which would be to involve Australia Post in the actual collection of the GST. That alone would require a legislative change in Australia, not the sort of thing you just snap your fingers at. You involve an independent statutory authority who are in the parcel area operating in a competitive marketplace. There are quite a few steps to be taken here.
But the important point I wanted to come to is that we said in our report, whilst we understood many retailers might express disappointment that you couldn't just click your fingers and change these settings overnight, we didn't feel this was the major factor really driving the use of the online medium at the moment by many consumers, and we outlined four reasons for that. Now, I'd be interested in your response to that because there has been a lot of focus in your submission and also in the Fair Imports Alliance submission about the GST issue. We fear that if retailers are focused on that issue they may miss the point. This is a new competitive landscape and we think that if people just think that solving the low value threshold is going to change the landscape, we fear that retailers are going to be sorely disappointed.
MRZIMMERMAN (ARA): Well, certainly I hear what you're saying and I agree. We've also said today and in our report that there are a number of other factors influencing the retail sector. I think it is also quite clear in what we said today that retailers are struggling with the online space. They do need assistance, they do need education and support, and we would look towards the government to assist. In relation to other reasons why people are buying online, yes, there are many and varied reasons why people will purchase online. What we are definitely seeing though is that because of the threshold - and it is possible to bring in those products at the $1000 market, and in some cases even over the threshold by splitting them up. I hear what you're saying but it is still a huge issue from what we're being told by our retailers that they are not able to compete whilst that threshold is so high. You've also said in your report that you would like to see the threshold brought down or you believe it could be brought down to $500.
MRWEICKHARDT: No, we didn't articulate any figure at all. We simply said that once a more efficient process was put in place the LVT should be lowered as far as was practical, as long as it remained cost-effective. A theoretician would say, "It would be lovely for it to be zero," but the tax system has thresholds throughout it, simply because it's not practical to collect tax from people. We would all be filling out income tax returns and making a dollar income if there were no thresholds. Thresholds exist everywhere because there is a practical recognition that sometimes it's just not cost-effective to collect taxes at certain levels. We were saying, "Lower it as far as you can whilst remaining costeffective."
MRZIMMERMAN (ARA): The Australian Retail Association has also said that we would like to work with those people that have the carriage of that to assist in bringing that down. We are very aware of the fact that there needs to be work done and we would like to be involved in assisting that area to ensure that that happens as quickly as possible.
MRWEICKHARDT: Can I just follow that up, because our recommendation in the report was that there was an independent taskforce set up, and we had in mind a group of people who were expert in the sorts of processes that would be required to reengineer a system for examining incoming parcels, scrutinising their value, assessing the duty and the GST and then billing customers correctly and efficiently and with minimum hold-up of parcels. Now, forgive me, I'm not sure I see the Australian Retailers Association or indeed the retail industry necessarily bringing particular expertise to that issue.