Sectors most likely to pass on Carbon Tax price increases revealed

Category: News

A new survey by the Australian Industry Group has found that 42 per cent of businesses across the manufacturing, services and construction sectors will increase their prices due to the newly introduced Carbon Tax.

Conducted in the second half of June and released under the Selling price intentions in response to the carbon tax, June 2012 name to coincide with the introduction of the Carbon Tax, the survey found that out of 621 respondents, 40 per cent of manufacturers, 40 per cent of service providers, and 44 per cent of building and construction businesses indicated they plan to try to recover their input cost increases by immediately raising their selling prices.

As business grapple with the Carbon Tax in its early days, Chief Executive Innes Willox says the Australian Industry Group will concentrate on monitoring the carbon cost burden.

“Plans to recover cost increases appear to be influenced by two broad considerations: the extent to which the business is trade exposed and the current market situation facing the business,” Willox says. “For instance, although building and construction is not trade exposed, the deep slump facing large parts of this industry is likely to inhibit the ability to pass through costs.

“There is 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 per cent among suppliers of construction materials to 11 per cent of food and beverage manufacturers.”

The survey also revealed a considerable range in the proportions of services businesses that will attempt to pass costs on to customers. According to the survey, communications services businesses (82 per cent) are most likely to attempt to pass on cost increases, while businesses in the finance & insurance services and the accommodation, cafes & restaurants industries (both 22 per cent) are far less likely to attempt to pass on their carbon-tax related cost increases.

The Carbon Tax & the ACCC
Willox says the survey results bring into focus the issues likely to face the ACCC in performing its role in relation to carbon tax cost pass-through.

“There is considerable confusion in the business community about the ACCC's role,” he opines. “The Government has directed the ACCC to take a role in relation to claims made by commercial parties about the impact of the carbon price. The ACCC will seek to ensure that businesses do not make misleading claims about price increases as a result of the carbon price. Critically, the ACCC does not have a role in formally monitoring, setting or restricting price increases linked to the carbon price and the ACCC has no power to prevent a business from putting up its prices as a result of the carbon price.

“In short, 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.”

Further details about the ACCC's Carbon Tax role are available here.

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