Entering the new year, cost-of-living has been making headlines across Australia, in our households and within the halls of power alike. Every policymaker in the country, from parliamentarians to the Reserve Bank, seem to be throwing every tool in their war chest at the elusive issue. However, each proposed solution comes with a price tag, risking escalating inflation or interest rates; either way, everyday Aussies are footing the bill.
Now more than ever, Australians are questioning how much they pay at the counter, placing retailers at the heart of one of 2024’s most paradoxical policy discussions.
Yet amidst this dialogue, the cost-of-trading crisis remains conspicuously absent.
The fact that retail is one of the stabilising forces holding our economy together isn’t discussed nearly as much as it should be. Businesses in this sector have adapted swiftly to tightening monetary policies, slashing prices to maintain market presence and sales volume, even at their own expense.
Experience from past economic downturns suggests that when policymakers have supported businesses, there has always been an inadvertent positive impact for consumers.
The Fair Work Commission is once again reviewing modern awards, offering industries a chance to simplify our heavily regulated system amid ongoing industrial relations reform. As business owners, you know the amount of time that goes into manoeuvring through massive amounts of red tape. After all, time is money, money that usually goes into keeping up with continuous hikes in labour costs.
Streamlining regulatory frameworks to support retail growth and sustainability will alleviate cost pressures on consumers and foster innovation in a landscape that’s always changing at breakneck speed.
One of the objectives of the Modern Awards Review is to enable security for both employers and employees. In retail, flexibility is crucial to secure work, yet there persists a costly misconception regarding the insecurity of certain employment types, including casual work, fixed-term contracts, seasonal work, contracting and labour hire. Not all businesses can afford to fill labour shortages through full-time work. Alternative forms of employment not only save businesses in spades, but also provides opportunities for people most in need of flexible work arrangements.
If the public demands lower retail costs and enhanced competitiveness, policymakers must prioritise supporting retailers in reducing business costs. Retailers often bear the brunt of inflation, with increased expenses passed on to consumers following rises in insurance premiums, energy and/or costs, and interest rates.
Mandating least-cost routing could further alleviate financial strain on retailers. While larger stores absorb payment costs, smaller businesses cannot afford to do so. Enforcing least-cost routing, especially amid the industry’s cost-of-trading crisis, is crucial.
According to an RBA report, for a business, an eftpos transaction costs an average of 30 cents for a $100 purchase, or 0.3 per cent, while it’s an average of 0.5 per cent for Visa and Mastercard debit transactions. In theory, least-cost routing was introduced by the RBA to put downward pressure on payment costs, but only 64 per cent of business terminals are enabled with LCR.
The onus of LCR uptake lies with banks, who lose money when they make the switch, which is why retailers have long been advocating for the Reserve Bank to mandate least-cost routing especially as the industry works through its cost-of-trading crisis.
As Australia grapples with the pressing issue of cost-of-living, we need to shine a spotlight on the overlooked cost-of-trading crisis facing retailers. Streamlining regulatory frameworks, supporting flexible employment arrangements, and mandating least-cost routing, are some of the ways policymakers can alleviate financial burdens on businesses and consumers alike. Addressing these challenges head-on will not only bolster the resilience of our retail sector but also foster a more prosperous and competitive economic landscape for all Australians.
By: Deputy CEO Lindsay Carroll, National Retail Association
