Businesses overestimate carbon tax costs

A survey has found many businesses believe the carbon tax has increased their costs by far more than it actually has.

The study of nearly 500 firms by the Australian Industry Group found around half experienced an immediate impact on the cost of production inputs when the carbon tax was introduced on July 1, with 61 per cent of manufacturing businesses noting rising prices.

A follow up survey found that businesses said the carbon tax had increased their energy costs by an average of 14.5 per cent, but the Bureau of Statistics Producer Price Index found a much lower 6.7 per cent rise in energy prices during the September quarter which followed the introduction of the tax.

The Australian Industry Group says many firms also overestimated the impact of the tax versus the effect of network price increases due to transmission maintenance and improvement (poles and wires).

"In the November survey, manufacturing businesses attributed close to 85 per cent of their total electricity cost increases over the past year to the carbon tax, whereas data from other sources suggest that, at least for many smaller businesses, the contribution of the carbon tax to total energy price rises was probably closer to one half," observed the Ai Group's chief executive Innes Willox.

The Ai Group says the recent 18 per cent price increase for electricity in New South Wales was roughly half due to the Federal Government's carbon pricing scheme and half due to rising network costs.

The survey also found that around a third of manufacturers and construction businesses and almost half of services businesses surveyed could not estimate the direct impact of the carbon tax on their own energy costs six months after its introduction.

While many businesses may have overestimated the impact of the tax in rising energy costs, Mr Willox says a lot of firms are struggling to pass on any of those rising costs.

"The first survey in our multi-stage research program, which we conducted in June before the carbon tax took effect, suggested that just 42 per cent of businesses intended to pass on their increased costs," he said.

"The barriers they face include: pricing power among their customers; local demand conditions; and competition from imports produced in countries that do not impose similar carbon costs." The Ai Group says food manufacturers have been hit particularly hard, with 90 per cent reporting immediate cost increases but only 11 per cent being able to pass on those increases to customers.

"Food manufacturers do not qualify for the trade exposed industry assistance program and are currently facing substantial resistance to price rises from the major retailers," Mr Willox added.

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