The Fragmentation Tax
23.02.2026 - 05:11
Australian retailers operate across a patchwork of inconsistent state and territory regulations that, left unchecked, will cost the economy $26 billion and households $9.4 billion over the next decade. Commissioned by the Australian Retail Council, this Mandala report finds that regulatory fragmentation in retail - Australia's second-largest employer, generating $649 billion in economic activity annually - is compounding the country's productivity crisis at the worst possible time. The report identifies specific issues in transport and logistics, and packaging and waste as priority areas for reform, where harmonisation alone would inject up to $1.65 billion into the economy over 10 years. It recommends the Federal Government use its National Competition Policy framework to drive reform - including a $260 million increase to the National Productivity Fund, a new National Harmonisation Council, and a mandate that Regulatory Impact Statements explicitly quantify fragmentation risks.
Australians are struggling with high prices while weak productivity growth reduces their wages and living standards. Addressing regulatory inconsistencies in one of the most systemic sectors and biggest employers in the economy - the retail sector - is a unique opportunity to help address both these challenges at once.
To support retail is to support the economy. The retail sector is the second largest employer in the country. It employs over 1.5 million Australians and generates $649 billion of income for the Australian economy every year. The retail sector is highly systemic. It permeates throughout the economy and is a critical part of the supply chain for almost every business in Australia. This presents a significant opportunity: addressing problems in the retail sector is one of the biggest-bang-for-buck reforms the government can pursue.
Left unchecked, inconsistent state and territory regulations will cost the Australian economy $26 billion and cost households $9.4 billion over the next 10 years. Regulatory inconsistencies mean retailers face unnecessary costs as they contort their business operations to deal with inconsistent approaches to regulation. It means a retailer transporting goods from one state to another may have to change trucks at the border. It means fleet managers must design elaborate delivery plans when neighbouring local councils have different delivery curfew regulations. It means national retailers need to procure different types of cups in different states to meet fragmented regulatory requirements.
Areas for immediate reform are in transport and logistics, and in packaging and waste reduction regulations. Transporting goods across Australia is a regulatory challenge. Heavy vehicle standards, accreditation and permit processes, commercial vehicle standards, and fatigue management requirements are inconsistent. Harmonising these regulations alone would inject $1 to $1.3 billion into the economy over 10 years.
Packaging and waste reduction regulations are riddled with jurisdictional inconsistencies. Container deposit schemes and bans on single-use plastics vary. Cleaning up these regulatory inconsistencies alone would add $300 to $350 million to the economy over 10 years.
The Federal Government should use its National Competition Policy framework to prioritise cross-jurisdictional reforms in the retail sector. To achieve this the Commonwealth Government should:
- Increase the National Productivity Fund by $260M to support regulatory harmonisation
- Establish a National Harmonisation Council within the NCC to drive cross-jurisdiction decisions and delivery
- Deliver the first harmonised regulatory package within 12 months
- Mandate that Regulatory Impact Statements explicitly acknowledge and quantify fragmentation risks
Read the full report here.
Read our latest posts
How EV adoption insulates Australia against oil supply shocks
Mandala’s latest research finds that the adoption of electric vehicles is helping to insulate Australians from the oil supply shocks. This analysis looks at the contribution of Australia’s electric vehicle fleet to our petrol reserves, as well as the savings in fuel costs for Australian households.
16 Mar, 2026
Shaping the Australian banking system for a changing economy
Mandala’s latest research, prepared for the Commonwealth Bank of Australia, finds that Australian banking has been transformed beyond recognition by technology, globalisation, and regulatory change. However, policy has not kept pace. Major banks now face a shrinking revenue base while providing a growing suite of collective goods including regional branches, ATM networks, and payment infrastructure, that comparable financial institutions are not required to provide. The report finds that declining profitability and an uneven regulatory playing field amid rising geopolitical uncertainty place Australia's financial resilience at risk. It recommends three principles for policymakers to shape Australia’s banking system to best serve our national interest. First, consider system-wide impacts of policy settings. Second, apply the same obligations to firms conducting the same activities with the same risk. Third, assess how overseas firms operating in critical parts of the financial system would behave in a crisis.
15 Mar, 2026
The Fragmentation Tax
Australian retailers operate across a patchwork of inconsistent state and territory regulations that, left unchecked, will cost the economy $26 billion and households $9.4 billion over the next decade. Commissioned by the Australian Retail Council, this Mandala report finds that regulatory fragmentation in retail - Australia's second-largest employer, generating $649 billion in economic activity annually - is compounding the country's productivity crisis at the worst possible time. The report identifies specific issues in transport and logistics, and packaging and waste as priority areas for reform, where harmonisation alone would inject up to $1.65 billion into the economy over 10 years. It recommends the Federal Government use its National Competition Policy framework to drive reform - including a $260 million increase to the National Productivity Fund, a new National Harmonisation Council, and a mandate that Regulatory Impact Statements explicitly quantify fragmentation risks.
23 Feb, 2026
Reforming Victoria's Windfall Gains Tax
Victoria's Windfall Gains Tax (WGT), introduced in July 2023, has compounded a decade of new and increased property taxes that have made Melbourne the most costly major city in Australia for development. Commissioned by the Property Council Victoria, this Mandala report finds that developer taxes and charges now account for 18% of total costs on Melbourne developments - double the rate of Sydney - and that the average WGT liability pushes project returns below the viability threshold. The analysis estimates that removing the WGT could unlock $1.4 billion in additional annual investment, support 2,700 jobs and deliver the equivalent of 3,100 new homes per year by 2030. The report also presents a suite of targeted reforms across financial relief, predictability, and policy alignment that would restore investor confidence while balancing the government's revenue objectives.
23 Feb, 2026