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Oz Businesses Surveyed On Carbon Tax Impact

by Mary Swire,, Hong Kong

31 January 2013

Australian businesses estimate that the controversial carbon tax has increased their energy costs by an average of 14.5%, as new research shows that its burden has fallen "very unevenly" across industry sectors.

The Australian Industry Group (Ai Group) has analyzed the first six months of the carbon tax's implementation, and its impact on business costs and prices. Its findings are based on a multi-stage research project, comprised of three surveys of businesses across the manufacturing, services and construction sectors taken at various points during the June-November period.

The Labor government implemented its carbon pricing mechanism (CPM) on July 1. The CPM requires around 500 large carbon emitters to purchase a permit for each tonne of pollution they release into the atmosphere. A permit for the 2012-13 financial year costs AUD23 (USD24). A strict penalty regime accompanies the mechanism, whereby businesses found to be falsely blaming the carbon tax for price hikes are liable for fines of up to AUD1.1m.

Ai Group's main survey of 485 businesses, conducted at the end of November, found that the estimated energy cost increases generated by the carbon tax were broadly consistent across sectors. Manufacturing businesses estimated an average rise of 14.5%, service providers calculated a figure of 13.6%, and construction companies a rise of 14.8%.

Around half of all businesses (49%) experienced an increase in some of their input costs (energy and other inputs) immediately after the carbon tax was introduced. Input prices increased immediately for 61% of manufacturing businesses, 36% of services businesses and 52% of construction businesses.

In particular, food manufacturers were the most likely to have reported immediate rises in their input costs, with 90% of those surveyed doing so. They were also those least able to pass on higher costs through the supply trade, and do not qualify for the trade exposed industry assistance program. This, Ai Group says, illustrates that the "net cost burden of the carbon tax has fallen very unevenly across industry."

However, Ai Group also notes in its analysis that business perception of the tax's impact does not entirely tally with data from other sources. There may be an element of over-estimation in businesses' calculations, based on the high profile accorded to the levy, the Group suggests. It points to the attribution by manufacturing companies of 85% of their total electricity cost increases over the past year to the carbon tax. The true figure may be closer to 50%, particularly in the case of smaller businesses, the Group believes.

Nonetheless, it is clear that the tax is adding to the pressures already faced by Australian businesses. Commenting on the survey, Ai Group Chief Executive Innes Willox said: "The cost imposts on domestic businesses and the resulting squeeze in margins come at a time when many businesses are under considerable pressure from a broad range of factors including the very strong Australian dollar; strongly rising unit labor costs and the direct and indirect impacts of the prolonged contraction in residential and commercial construction. As Ai Group has argued over the past eighteen months, the fixed carbon prices that apply until July 2015 are well above current and projected international prices and are a major flaw in the current approach. This considerable additional burden on Australian business could be substantially reduced through early linkage to much lower international prices without compromising Australia's 2020 greenhouse gas targets,"

TAGS: tax | business | energy | Manufacturing | law | Australia | food | manufacturing | carbon tax | revenue statistics | tax reform | construction | trade | services

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