Retail inquiry too late for some of us, says Gerry Harvey

Harvey Norman is less affected than some by internet traders but says it is a threat that needs urgent attention. Photo / APN

Australia's inquiry into the retail industry is too late to stop some retailers going out of business through competition from offshore websites, says Gerry Harvey, executive chairman of Harvey Norman Holdings.

The Government did not appreciate the urgency of the threat facing domestic retailers from overseas-based rivals making use of the internet, Harvey said yesterday.

Harvey Norman is Australia's largest furniture and electrical retailer.

"You've got every second person in the country importing things from overseas, evading duty, not paying sales tax," Harvey said.

"It's gaining momentum at a rapid rate. Rather than clip it in the bud, they'll end up doing something about it, but it will be too late. You've got an awful lot of retailers that are going to be going broke after Christmas."

Prime Minister Julia Gillard's government on Friday announced an inquiry into the impact of globalisation on the retail industry, which includes looking at growth in online purchases from abroad by consumers.

The Productivity Commission will report its findings next year as the Government seeks to safeguard the future of the A$242 billion ($325 billion) industry, assistant treasurer Bill Shorten said.

The commission will also start a "compliance campaign" to ensure sales taxes and customs duty concessions on imports are not being exploited, Minister for Home Affairs Brendan O'Connor said.

"There's a lot of momentum, through word of mouth, about internet sales giving people the chance to access a discount," said Angus Gluskie, who manages about A$350 million at White Funds Management in Sydney. "It's a loophole right around the world."

Harvey said one concern was that overseas online competitors were able to avoid Australia's GST.

"You can't have a situation where a bloke sets up a retail shop in Australia and sells stuff and has to pay GST, and then some bloke sets up in America and he doesn't," he said.

"And the bloke who sets up his shop in Australia employs people, pays rent and these sorts of things. That's just not on."

The threat to Australian retailers has been exacerbated by the strengthening Australia dollar, which has increased the spending power of consumers shopping overseas.

Australia's currency has advanced 18 per cent since the end of June, the most of 16 main currencies, reaching parity with the US dollar in October for the first time since July 1982.

Gluskie said the danger to Australian retailers was sometimes exaggerated.

"The [core] drivers of retail spending are very good going into next year," he said, adding that the high Australian dollar was an extraneous factor that had made things seem worse.

Harvey said that an alliance of retailers had been formed to press their case. The group includes Westfield Group, the world's largest owner of shopping centres, and Myer Holdings, Australia's biggest department store chain, the Weekend Australian reported. The report said the alliance was planning newspaper and television ads similar to those used by the mining industry against a resources tax, which played a part in toppling former Labor Prime Minister Kevin Rudd. Harvey said Harvey Norman had also considered setting up websites overseas to avoid some domestic taxes.

"The problem is, we'll spend the money putting it all together and by the time we've done it, the Govern-ment will close us down."

He said the trend towards shopping on overseas websites affected furniture retailers like Harvey Norman less than others that sold products such as bicycles and watches.

- Bloomberg