Key Points
- Labor is set to scrap an import tariff of up to 5 per cent for nearly 500 items.
- The tariff raises little revenue and adds unnecessary compliance costs, experts say.
- Its removal is expected to reduce consumer prices and incentivise trade with Australia.
Hundreds of items including fridges and washing machines could become cheaper as the government moves to abolish "nuisance" tariffs.
They will be scrapped on nearly 500 items on 1 July, saving companies more than $30 million in annual compliance costs.
Treasurer Jim Chalmers on Monday labelled it the biggest tariff reform in decades, stating it will "be better for businesses, better for consumers and better for the economy".
The move by Treasurer Jim Chalmers is set to eliminate 14 per cent of Australia's taxes on imported goods. Source: AAP / Bianca De Marchi
What tariffs are being scrapped?
AMP chief economist Shane Oliver said the government is stamping out import tariffs that aren't "actually doing anything", with it often offset by concessions.
The Productivity Commission in a 2022 report found they had "negligible benefits for Australian producers, but impose compliance costs on businesses."
Oliver explained that these tariffs helped protect domestic industries, many of which no longer exist but were slashed when free trade agreements were negotiated.
Instead, these tariffs are now a "nuisance" that raise minimal government revenue, less than 1 per cent in 2022-23.
"Getting rid of them does make a lot of sense," he told SBS News.
What items are included?
There are a variety of items that will no longer have the import tax including white goods such as washing machines, fridges, and toasters.
Import costs will be slashed on everyday essentials such as toothbrushes and menstrual products as well as pyjamas, fishing reels, electric blankets, and even dodgem cars.
The full list of items will be finalised and revealed in the federal budget on 9 May.
What impact will scrapping the tariffs have?
Professor John Romalis, Head of Economics at Macquarie Business School, said the change will eliminate processing costs and "burdensome administration" associated with importing into Australia.
"It reduces costs for existing suppliers and also new suppliers will have an incentive to supply to the Australian market," Romalis told SBS News.
"We now might see more products coming from the countries where we don't have a free trade agreement because they're on an equal footing, with the tariff now zero."
This includes suppliers sourcing parts for their products from different countries, driving down the cost of the item which will "eventually feed through to consumers".
How much are consumers expected to save?
It's not as simple as deducting 5 per cent off an item.
Consumers won't feel the full effect of the savings as it applies on the wholesale or landed price of an item.
"The price won't come down by that full amount because that tariff is applied on the imported price, not the price at the shop," Oliver said.
Romalis said the savings are "not insignificant" as "every bit adds up".
"So it might be a while before the companies decide we'll actually pass on the benefit from that to consumers, but it is a real reduction in cost," he said.
He added that it is a "clever reform" as it "actually delivers more bang to the consumer than it costs the government".
With additional reporting from the Australian Associated Press.
