New report claims eliminating GST-free threshold could save 33,000 retail jobs and create 23,000 new ones
Friday, March 16, 2012/
The National Retail Association says 33,000 jobs will be lost from the retail sector by 2015 unless the Federal Government commits to either eliminating or significantly reducing the $1000 GST-free import threshold, using a new Ernst & Young report to back up its claims.
The report also claims that scrapping the threshold would result in between 14,000 and 23,000 jobs being added to the domestic online retail sector, with between 5900 and 9900 added to the local bricks and mortar sector.
The new push in the ongoing campaign by domestic retailers against the threshold comes as department store Myer has weighed into the debate on penalty rates, with chief executive Bernie Brookes threatening to close some stores on Sundays if it’s no longer economical to keep them open.
The NRA has commissioned a report from Ernst & Young that claims 118,000 jobs will be lost in the retail sector by 2015. There are a number of solutions to stem that tide, it says, but far and away the most effective would be reducing the GST-free threshold.
The Productivity Commission said in its report on the retail sector last year that lowering the GST threshold would cost more money than it would save due to inefficiencies in actually intercepting parcels.
NRA executive director Gary Black says the Government needs to pay more attention to fixing those inefficiencies given the huge number of jobs it would save.
“The importance of this is driven by the fact there is an exponential growth in internet shopping, and every single analyst will agree that although online shopping in general is growing, offshore purchases are growing even faster.”
“The very obvious impact of this is that we will see domestic trade shifted offshore.”
In a complicated analysis, Ernst & Young says that if the low-value threshold continues to operate, around 118,700 traditional retail jobs will be lost by 2015. And while 27,230 would be transferred back to the domestic online sector, 44,150 would go to overseas online retailers.
The report says that although the impact of removing the low-value threshold is not known and “difficult to determine”, it says under some scenarios removing it would cause more shoppers to buy from domestic retailers.
When removed, between 20,000 and 33,400 jobs could be accrued to the local retail industry, including domestic online retailers.
The price impact associated with the removal of the threshold would be 14%, according to Ernst & Young’s modelling.
“All other things being equal”, it says, removing that price differential will reduce demand for imports and increase demand for domestic substitutes.
Ernst & Young says that given the modelling is so uncertain, there are two scenarios. The first is that a 14% price rise associated with the removal of the low-value threshold would reduce demand for imports by 70%.
In a medium-impact scenario, the 14% rise would only reduce demand for imports by 42%.
The Government has already indicated it has no intention of lowering the threshold, and the Productivity Commission also said last year it would be uneconomical to do so in current circumstances. It also noted other areas, including zoning laws and penalty rates, which deserve attention.
However, Black says the issue is that retailers are playing on an uneven ground, and that this report shows lowering the threshold will actually save a significant number of jobs.”
“There’s two significant findings here. The first is that retail employment will contract anyway because of a range of factors that are impacting on retail, and that 118,000 jobs will be lost by 2015.”
“The other is this critical analysis of what can be done to prevent job losses. And far and away the most important move we could make is amending the low value threshold.”
Black wants the threshold eliminated, or failing that, reduced to something miniscule such as $20. The report will be used to lobby Government further.
“They can flip the switch overnight if they wanted to, so we’re challenging them to understand the consequences of not doing what every other Government in the world has done.”
Meanwhile, Myer has weighed into the debate over penalty rates, with Bernie Brookes saying the company will have to close certain stores on Sundays if nothing is done.
Brookes joins a chorus of retail executives complaining that higher penalty rates are hurting profitability.
“There’s no doubt the customer is no longer shopping Thursday night and Saturday morning but shopping all through the week,” he told the Australian Financial Review today.
“It may mean potentially we might not even trade on Sundays in some stores because it’s uneconomical to do when you have to pay 200% penalty rates.”