Manufacturers and retailers fret over carbon tax roll out

The start of the carbon tax on July 1 will introduce a “new phase of uncertainty” for many Australian businesses, particularly for manufacturers, according to the Australian Industry Group.

AIG chief executive Innes Willox highlighted the level of uncertainty in the business sector with regard to the carbon tax.

“Businesses don’t know how much of the increased costs faced by energy producers, and others with direct and indirect liabilities, will be passed onto them,” he said in a statement.

“They also don’t know whether they can pass those costs on to their own customers.”

“Most manufacturers, for example, are concerned that they may face higher prices for many of their inputs, which they then can’t pass on because of… intensifying competitive pressures.”

AIG surveyed 200 manufacturers, asking whether they intend to increase their selling prices from July 1 as a result of the carbon tax.

“Less than half (40%) intend to try to put up their prices immediately,” Willox said.

“Of the manufacturers who intend to increase their prices, about half (51%) will try to raise prices on all of their items [and] 22% will try to lift prices on more than half of their products.”

However, the majority of manufacturers surveyed said they do not plan to increase their selling prices, and will instead absorb the cost rises.

According to Willox, this will result in a further erosion of margins, placing even more stress on the struggling sector.

“The single biggest impact for most businesses will be the increase in electricity and gas prices as suppliers pass through some or all of their own carbon costs,” he said.

“So far, we’re seeing carbon-related increases of around 2.1 cents per kilowatt hour of electricity and $1.20 per gigajoule of gas.”

“There is much more uncertainty and much less transparency about the extent to which costs of non-energy inputs will rise.”

His statement comes on the back of similar comments made by the Australian Retailers Association, which said retailers should be “feeling nervous” ahead of the carbon tax start date.

According to ARA executive director Russell Zimmerman, retailers are particularly vulnerable because of their position at the end of the supply chain.

“No compensation for retailers or small business will see them hit with direct and indirect increases in costs,” Zimmerman said in a statement.

“The ARA conducted a member survey last year asking retailers what impact the carbon tax would have on them.”

“Eighty-three per cent of retailers said they expected consumers to spend less, and 56% said they would have to pass their own increased costs onto customers.”

“We are definitely seeing retailers brace themselves for a further blow.”