Retailers are urging the federal government to accelerate regulatory reform and to provide further cost relief and as the supply chain impacts of the Middle East conflict intensify.

According to the Australian Retail Council’s (ARC) latest survey of retailers, supply chain conditions have worsened over the past month for three in four surveyed businesses, with cost pressures intensifying across freight, logistics and energy.

Concerns about the outlook are mounting, says the ARC, with historically weak consumer confidence and continued inflationary pressures.

Two in three retailers surveyed report a high or severe level of concern about trading conditions over the next three months, while around half expect disruption to persist for at least six months.

Shipping and freight costs remain a major pressure point, with around three in five surveyed retailers reporting increases of more than 10%.

ARC CEO Chris Rodwell says retailers continue to prioritise customers in the face of these challenges.

“Three in four [surveyed] businesses report they are absorbing cost increases either fully or partially,” he says.

“However, this approach has become unsustainable for many. Around two in five [surveyed] retailers now expect they will need to increase prices by approximately 5% within the next three months to offset rising costs, with some anticipating larger increases if current conditions persist.

“Costs are rising, margins are tightening, and retailers are being forced into difficult decisions. Retailers are doing everything they can to shield customers, but unless we see improvements or the supply chain disruption will unfortunately be felt by customers at the checkout.”

Recent measures welcomed, but more needed

Retailers have welcomed recent government measures to secure fuel supply, noting that fuel excise reductions and changes to the heavy vehicle user charge are providing “meaningful, if partial, relief”.

“However, the sector is calling for further targeted and practical support,” says the ARC.

“Priority measures identified by retailers include relief for freight and logistics costs, additional energy cost support, and further action on fuel excise. There’s also strong support for greater government effort to strengthen Australia’s fuel and energy security.

“Retailers emphasised that reducing administrative and regulatory burden – particularly inconsistencies across state borders – would deliver immediate benefits. Improved national coordination to reduce freight bottlenecks has also been identified as a critical reform to support the sector both during the current crisis and into the future.

“Governments can further assist smaller retailers by providing cash flow relief measures, including the deferral of taxes, to help businesses manage through this period of heightened uncertainty. Already in this financial year retail trade insolvencies are three times the level recorded across the whole of the 2021-22 financial year.

“Retailers have also issued a warning against measures that would limit trading activity, such as work-from-home mandates. Nine in 10 [surveyed] businesses say such restrictions would negatively impact the sector by reducing foot traffic, lowering sales and weakening demand.”

As governments consider further interventions, the ARC is urging policymakers to recognise retail as a critical component of Australia’s economic and social infrastructure – employing one in 10 Australians and comprising almost one fifth of GDP.

Mr Rodwell says policymakers must recognise the critical nature of the retail industry’s $444 billion contribution to the Australian economy.

“No matter what lies ahead in this crisis, retail must remain open and operating to ensure households can continue to access essential goods, maintain local employment and support economic stability,” he says.