Inconsistent state rules keeping costs high, growth low, Ikea tells Productivity Commission ruing plastic bag laws

Swedish retail giant Ikea tells the Productivity Commission a mishmash of rules across the states from plastic bags to selling knives to kids is keeping business costs up, prices high and tarnishing growth.

Swedish retail giant Ikea has pointed to a patchwork of rules across state borders that is adding to business costs and prices for shoppers.

Swedish furniture giant Ikea has derided Australia’s patchwork of state-based laws governing the use of plastic bags and waste as an example of the red tape strangling productivity growth in the economy.

It has become increasingly challenging and costly to implement single use plastic bans as a multinational operating in New South Wales, Canberra, Queensland, Victoria, Western Australia and South Australia because each state has its own regime.

“We strongly urge the alignment and consistency in policy and regulation on all packaging from a national standpoint,” Ikea told the Productivity Commission in its submission into Treasurer Jim Chalmers’s National Competition Policy reform project.

“This will make it easier, more cost effective and less resource intensive for businesses to be compliant. By alleviating unnecessary administrative burden for companies, resources can be better spent on the significant task of improving the sustainability of operations.”

It queried the genuine environmental benefit offered by the current system, given the infrastructure required for compliance “varies considerably”.

Ikea cited similar rules about selling batteries and knives to children for heightening complexity, costs and ultimately prices for the consumer.

It has drawn a direct line between conflicting regulations from state-to-state to the escalating cost of doing business in Australia and the cost of living crisis.

“Due to a lack of harmonisation in regulatory frameworks across state and federal jurisdictions and with international product standards, our business has faced mounting complexities and compliance costs outlined in this submission - ultimately challenging our ability to deliver on our commitment to provide the lowest possible prices for customers and our sustainability agenda,” the submission argues.

“We strongly support the focus on harmonisation reform proposed by the Productivity Commission.”

Productivity Commission chair Danielle Wood. Picture: Aaron Francis / The Australian

Ikea is among hundreds of companies to appeal to the Productivity Commission and its position comes ahead of Treasurer Jim Chalmers next month leading an economic reform roundtable in Canberra that will focus on solutions to lifting Australia’s laggard productivity performance.

The world’s largest furniture retailer which first set up a store in Australia 50 years ago and currently has ten, proposed its own antidotes particular to the $400bn retail sector.

A similar complex web of rules and regulations legislates the selling of batteries.

The recent passing of the Product Lifecycle Responsibility Bill in New South Wales mandates product stewardship for battery products, whereas the rest of Australia remains voluntary.

The NSW government has specifically designed the Act so that it can readily be adopted by other jurisdictions, paving the way for a nationwide regime, but this is yet to happen.

And the selling of knives to children - front of mind as Ikea stores are loaded up with cutlery - is just as baffling. Some states prohbit the sale of knives to those under the age of 18, and others at 16.

“There is currently inconsistency across Australian states and territories regarding legislation on the sale of knives to minors. For example, NSW, WA, VIC, and QLD prohibit sales of knives to individuals under 18, whilst SA and ACT currently set the minimum age at 16,” the submission said.

“Additionally, ACT and QLD mandate specific signage requirements at the point of sale, and QLD requires staff to complete mandatory training before selling knives.

“For a national business, differing state laws require co-ordinated efforts to ensure compliance across all regions. This includes staff training programs aligned with local regulations, correct signage at each site, updates to point-of-sale systems, and internal compliance checks.”

Ikea reflected on the problem of Australian standards deviating from international standards in areas such as labelling, packaging and infant safety, requiring specific processes and systems gumming up the supply chain and ultimately passed through to shelf prices.

For example, Ikea sells 500 items exceeding 50 centimetres, the height at which it must display warning labels, shelf advice and publish enhanced manuals. It applies to all furniture, whereas in the US market the product standard only applies to storage.

“Country-specific requirements demand separate supply flows, leading to increased costs and extended delivery times. Australia’s long supply chains mean products take even longer to reach consumers, compounding these issues, and can result in a lack of product availability.”

Originally published as Inconsistent state rules keeping costs high, growth low, Ikea tells Productivity Commission ruing plastic bag laws