Carbon tax will hit Australian food manufacturers

Posted by AFN Staff Writers on 2nd July 2012

The mandatory government imposition of a price for carbon emissions in Australia (which industry and consumers have dubbed the ‘carbon tax’) came into effect on Sunday 1 July, 2012. The Australian food industry expects the new imposition to lead to price increases in Australian-manufactured food because manufacturers will face energy cost rises.

The Australian Food and Grocery Council’s Acting Chief Executive Dr Geoffrey Annison, emphasising that manufacturers prefer not to pass on costs to consumers if possible, acknowledged that the case of carbon tax is different. “With the carbon tax the whole point of the policy is to allow the tax to flow down the supply chain including to the consumer to provide effective market signals,” he said.

Disadvantages against food imports

Dr Annison noted that Australian manufacturers that pass price rises to consumers risk becoming less competitive with the import market.  “If consumers choose these products over more expensive local products how can we maintain an Australian food and grocery manufacturing industry?” Dr Annison asked.

Grants for food and grocery manufacturers

Under the $150 million package that was also part of the government’s reforms, food and grocery manufacturers are eligible to apply for grants. However, Dr Annison believes that this may not be sufficient to negate the substantial impact of the carbon tax.

“This tax will impact industry competitiveness, affecting its capacity to employ, innovate and invest and may cause manufacturers to look elsewhere to produce their products.”

As Australian Food News reported last week, the Clean Technology Investment Program also provides manufacturers with the opportunity to receive money to replace “energy-inefficient” equipment with updated technology.

Australian Industry Group announcement

Chief Executive of the Australian Industry Group (Ai), Mr Innes Willox, yesterday said, “An Ai Group survey marking the start of the carbon tax has found a big proportion (42%) of businesses across the manufacturing, services and construction sectors will try to put up their prices immediately following the introduction of the scheme today.”

Mr Willox noted that the survey revealed considerable variation in the intentions of businesses in different parts of industry to attempt to pass through at least a proportion of their cost increases.

“In the manufacturing sector, the proportion of businesses that will try to raise their prices ranges from 60% among suppliers of construction materials to 11% of food and beverage manufacturers,” Mr Willox said.

The ACCC’s role in monitoring of price increases

The Ai Group has expressed concerns about the challenges that Australia’s consumer protection agency, the Australian Competition and Consumer Commission (ACCC) will have in relation to carbon tax cost pass-through. Mr Willox said that there is considerable confusion in the business community about the ACCC’s role.

“The ACCC’s role is not about preventing legitimate cost flow-through but relates to misrepresentations about the impact on prices of carbon-tax related cost increases. Businesses need to take particular care not to overstate the impact of the carbon tax in negotiating price increases,” Mr Willox said.

Further details about the ACCC’s role are available in the Carbon Price Claims – Guide for business.