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
Harnessing AI in the court system
Mandala’s latest research, commissioned by Microsoft, examines how AI can help Australian courts improve access to justice by reducing persistent case backlogs. We find that three promising AI applications (smart scheduling, document review and legal research support) could deliver around 95,500 additional case finalisations a year. These applications help courts manage existing workloads more efficiently, while reinforcing the integrity of court processes.
29 Oct, 2026
Rethinking the APR
Mandala's latest research, commissioned by Block, examines whether US credit disclosure requirements remain fit for purpose in a rapidly evolving lending market. Drawing on economic analysis, a survey of nearly 1,600 US consumers and small business decision-makers, and proprietary credit data, the report finds that Annual Percentage Rate (APR) disclosures can misrepresent the perceived cost of short-term borrowing and influence consumer choices. The report makes the case for modernising credit disclosure requirements, with a more flexible approach that better reflects different credit products while preserving consumer protection and access to credit.
15 Oct, 2026
The augmented attacker: the growing AI-driven cyber threat to Australian businesses
Mandala's latest research, commissioned by CyberCX (part of Accenture), shows that the AI-driven cyber threat to Australian businesses is growing. The report finds that AI could increase the frequency and severity of cyber incidents targeting Australian businesses. As AI-driven threats grow, Australian businesses could face losses reaching up to $37 billion a year. However, investing in foundational cyber defences such as patching known vulnerabilities could reduce annual losses from $37 billion to $13 billion, a $24 billion saving. Three-quarters of the savings are from preventative actions. The report highlights the actions required from businesses and government to improve cyber defence.
13 Oct, 2026
The Stagnant Nation: Lifting Australia’s Dynamism
Australians are going backwards on real wages and income. Real wage growth has fallen from 0.6 per cent in the 2000s to -0.7 per cent today, the slowest rate since the 1990s recession. Weak productivity growth is a key driver. Productivity growth has dropped from 2.2 per cent in the 1990s to just 0.1 per cent today. The Productivity Commission has pointed to declining economic dynamism as one cause for weak growth, with fewer businesses starting, growing and competing. We confirm declining economic dynamism across five key dimensions and estimate that reversing this decline seen since the mid-2000s could see a GDP uplift of $101 billion per year over the next decade. Our analysis finds that regulation could account for around 20 per cent of declining dynamism. Reducing regulatory burden to late-2000s levels could see GDP uplift of at least $20 billion per year over the next ten years.
7 Oct, 2026