How tariff cuts will save you money

Australians could see a small reduction in the price of everything from ballpoint pens to washing machines as a result of the federal government's move against so-called 'nuisance' tariffs.

Announced on March 11, the government will abolish almost 500 existing import tariffs from July 1, including a 5% tariff which currently applies to a range of everyday goods.

Federal Treasurer Jim Chalmers says the move will reduce compliance costs for businesses by more than $30 million each year, while also going some way to bringing down the price of certain consumer goods.

"This is meaningful economic reform that will deliver meaningful benefits to businesses of all sizes around Australia.

"Tariff reform will also provide a small amount of extra help with the cost of living challenge by making everyday items such as toothbrushes, tools, fridges, dishwashers and clothing just a little bit cheaper."

Business groups have responded positively to the announcement, with Bran Black, chief executive of the Business Council of Australia, describing the move as a necessary development.

"We welcome these changes because they remove an unnecessary burden and red tape on many businesses and this will flow through to consumers.

"Productivity Commission analysis shows every dollar of tariff revenue collected costs the economy up to $1.60."

What purpose do tariffs serve?

Tariffs, which are taxes imposed on imports, are typically put in place either to raise revenue or protect domestic industry from international competition.

Over the last few decades tariff rates in Australia have gradually been reduced or abolished entirely by various governments, with yesterday's announcement the latest move in that direction.

It won't get rid of tariffs altogether though, as the 500 or so tariffs that are set to be abolished as part of the reform only account for roughly 14% of the total.

By targeting specific goods and tariffs, the government says the move will benefit local businesses on the one hand without adversely impacting local industries on the other.

It also argues that tariffs on many of the goods it's identified as part of the reform deliver relatively little in the way of revenue for government coffers.

For example, the $3 million worth of bamboo chopsticks imported into Australia every year raise less than $3000 in revenue each year, while the $16 million worth of imported rollercoasters generate less than $40,000 each year.

Which goods will be affected?

With nearly 500 tariffs set to be abolished, the catalogue of items selected for removal is a long one, but here's a selection of the everyday goods that will be impacted by the removal of a 5% tariff and the revenue they currently bring in.

So, will households start to see a 5% reduction in the price of toasters from July? That's to be seen. Though because the tariffs apply to imported goods rather than the higher price retailers charge for them, it's likely to be smaller.

The government is currently conducting a consultation process until April 1 on the list of tariffs selected for removal, during which time submissions can be made. The finalised list will then be announced in the 2024 Federal Budget.

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