Carbon costs measured by Ai Group

Analysis of the first six months of the carbon tax and its impact on business costs and prices has found that businesses estimate that the tax has increased their energy expenditure by an average of 14.5 per cent. Ai Group surveyed 485 companies in June, July and November 2012.

There were also in-depth surveys of manufacturers undertaken in July and August.

Manufacturing businesses estimated an average rise of 14.5 per cent, service providers estimated an average rise of 13.6 per cent  and construction companies estimated an average increase of 14.8 per cent.

A third of those in manufacturing and construction ?did not yet have enough information? to asses the impact of the tax on their businesses.

“The high profile of the carbon tax appears to have led to some over-estimation by businesses of the specific impact of the carbon tax on their energy cost increases over the past year,? said Ai Group chief executive Innes Willox.

?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.

?Almost half (49 per cent) of respondents saw an immediate increase in their input costs when the tax was introduced on 1 July last year and 61 per cent of manufacturers reported an immediate increase in energy costs.

?More broadly, businesses face strong barriers to passing on costs arising from the carbon tax to their customers. 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,? Willox 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 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 labour costs and the direct and indirect impacts of the prolonged contraction in residential and commercial construction.

?As Ai Group has argued over the past 18 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,” Willox contended.

Sources: Ai Group, Manufacturer?s Monthly

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