Study calls for government intervention in Australian baby formula market

A new study says government regulation is need to address shortages of baby formula. (Getty) Source: Getty Images

An academic study into the Australian baby formula market has called for Government regulation to address the imbalance created by massive foreign demand from China.

A new study has called for regulation of the booming overseas trade in Australian baby formula that has led to mass shortages as foreign tourists buy up available stocks over the counter in Australia.

Consumer outrage over images of foreign tourists wheeling trolleys overflowing with infant formula and bare shelves has generated a slew of headlines lately with many supermarkets banning sales of more than a few tins as shortages are predicted to last for up to 18 months.

Deakin University Department of Economics senior lecturer Dr Xuan Nguyen who co-authored the study said while the practice of parallel trade - where travellers buy up a product then sell in another country without manufacturer approval - was not illegal. 

He said it was unregulated and surging demand from China from the growing middle class had led to the  shortage.

“At the moment the two issues that we can see are the shortage of baby formula and the price rises - and clearly Australian consumers are the ones who lose in this particular story,” he told SBS News.

“We have a number of policy recommendations in our research and most importantly it’s the right time for Australia to have more effective policy measures to control the quantity of cross border trade by parallel travellers.”

Dr Nguyen said a key recommendation in the study was the regulation of the market through customs controls on the quantity of formula being taken out of the country.

“The situation at the supermarkets is that we now have quantity control measures in place, but not at the customs level and we believe that it is the right time for the government to step in and to enhance the effectiveness of policy towards parallel trade in baby formula,” he said.

Dr Nguyen said the government had yet to impose customs controls on baby formula, but said it should follow the lead of the business community in imposing limits on how much one consumer could buy.

“We believe there is some scope for the government to step in and assist the business community in such a way that the market would work better for the consumer,” he said.

A spokesperson from the Department of Immigration and Border Protection said "baby formula is not a prohibited or restricted export; therefore the Department has no role in restricting the movement of this product out of Australia".

"The Department would have no role in making a decision to limit Australian export volumes of this product," he added when asked whether there any plans to impose any limits through Customs to the quantity of baby formula  taken out of Australia.

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