CARBON TAX OVERVIEW

COMMENTARY on the impacts and benefits of the Gillard Government’s Carbon Tax have arguably been lost among political squabbling, fear mongering from mega-corporations and everyone from industry representatives to eco-crusaders pushing their own agendas.

So what does it really mean for Queensland businesses?



In light of the information overload regarding the Carbon Tax, Gold Coast Business News has compiled to following industry snapshot.

Small business impacts

The Chamber of Commerce and Industry Queensland (CCIQ) represents all aspects of the state’s business community, and believes Queensland’s small-medium sized businesses will pay the highest price for the carbon tax.

CCIQ president David Goodwin highlights a lack of support for SME’s will see them suffer in light of driven down consumer spending and a blow to business confidence and viability.

“The tax will hit smaller businesses hardest because they cannot afford to pass on the costs of the tax, such as higher electricity prices, to their consumers, who will pick up and take their patronage elsewhere,” says Goodwin.

“While the Federal Government has been attempting to reassure the public that they will be compensated, there has been no mention of support for small-medium businesses.

“The projected business confidence figures for Queensland rest almost solely on the huge expansion planned in state’s gas industry. Taxing the bread winning resource sector at this time in the recovery will only harm the economy in the long run.”

Goodwin is calling on the Bligh Government to ‘stand up and shield the economy’ and act in the best interests of Queensland jobs.

Premier Anna Bligh told Gold Coast Business News prior to the Prime Minister’s announcement that she would look at the details with ‘one set of glasses on and that is ‘is it good for Queensland’’.

So far the Queensland premier has remained silent, but not so the LNP State Opposition leader Campbell Newman.

“Why won't Anna Bligh front the public and tell them when she knew the finer detail about the carbon tax and why Andrew Fraser has not done any modelling on its impact on our state?” says Newman.

“Anna Bligh is ducking the issue because she supports her Labor mates in Canberra even though she knows the carbon tax is bad for Queensland. We are a state that relies heavily on the coal industry and other metal processing such as alumina and nickel.”

Mining and resources

A full-time employee with a major Queensland steel producer linked with BHP Billiton says he was advised to start looking for another job just one day after the Federal Government’s proposal was outlined.

National accounting firm BDO says many Australian businesses will have a difficult transition to a cleaner and greener future, but none more so than mining and resources companies.

Carbon specialist and BDO partner Dylan Byrne says carbon costs won’t close the low cost mines run by most of the major producers, but will force them to evaluate where these projects sit on the investment portfolio – future investment and expansions may be done elsewhere.

“The resources and mining sector now has the triple whammy of competitive pressure from the strength of the Australian dollar, the impact of the mineral resource rent tax and now the effects of a price on carbon,” he says.

“Many mining companies are already reviewing the long-term viability of some of their operations.

“Australian based producers will (also) be at a disadvantage to their multinational competitors who will be able to dilute their Australian carbon costs as a percentage of global earnings.

“The Government should remain open to further opportunities to assist businesses through the next few years, especially given the difficulty in accessing such assistance.”

Byrne also says the transport sector is running on ‘knife-edge margins’ and the carbon tax will have extensive direct and indirect impacts.

Building and construction

The carbon tax will raise the cost of new homes and renovations worsen housing affordability and cripple the confidence in an already ailing Queensland building industry, according to Master Builders executive director Graham Cuthbert.

Cuthbert says the federal government’s announcement failed to address how the cost of building will be impacted by the carbon tax.

“We know trade exposed industries, like steel manufacturers, will be offered assistance and some consumers have been offered compensation, but it’s not enough to cover all the cost increases that are inevitable,” says Cuthbert.

“We estimate construction costs for a typical 200m² slab-on-ground home will increase by approximately $7,000–$9,000, which is based on the carbon price of $23 per tonne and where the construction of an average home involves an estimated 300–400 tonnes of CO². In fact, this rise doesn’t factor in an increase to transport costs, which may further increase these costs, particularly in areas outside South East Queensland.

“Housing affordability has already taken a beating in Queensland, with construction costs increasing last year when 6-star energy efficiency requirements were introduced and affordability set to worsen with the loss of stamp duty concessions from July and uncertainty about interest rates.

“All these factors combine to erode consumer confidence and create a very uncertain future for the building industry and housing affordability in Queensland.”

Cuthbert says Master Builders worked hard alongside the State Government in developing the property industry stimulus unveiled at the last State Budget announcement.

He fears the ‘life support’ offered by the State’s building stimulus will be ‘switched off come next July’.

Tourism and travel

The Queensland Tourism Industry Council (QTIC) says there has been little or no recognition of the likely impact the tax will have on the tourism industry.

Chief executive Daniel Gschwind believes it to be impossible to gauge the exact bottom-line impact on the industry at this stage, but says ‘it would certainly not be positive’.

“The international competiveness of Australian tourism and hospitality services will be negatively affected, a further blow to businesses already feeling the strong Australian dollar which is seeing domestic travellers choosing cheaper overseas holidays instead of holidaying locally,” says Gschwind.

“While domestic airfares will be driven up by the tax, international fares will not. And consumers with higher incomes, and thus a greater propensity to travel, will feel more of an impact on their hip pockets thanks to the price on carbon.

“A further concern for operators is how the new carbon pricing will affect consumer confidence, with any uncertainty translating into less spending on discretionary items like holiday.”

Gschwind says the tourism industry is fully committed to a sustainable economy, but questions the positive impact of the carbon tax on the environment and tourist destinations like the Barrier Reef.

“The tourism sector in Queensland has long recognised that a clean environment is a core asset to our industry. We have been making a significant investment, at a cost to businesses, to develop and implement sustainable practices for several years now,” he says.

“The proposed carbon tax will create a very challenging and costly business environment that our industry now needs to navigate, with the benefits being only a minimal reduction in global greenhouse gas emissions.”

Gschwind’s prediction that domestic airfares will rise was confirmed by Brisbane’s own airline giant Virgin Australia Group, which announced to the ASX that its estimated cost impact of the carbon tax will be around $45 million in FY13.

The bad news is that the costs will be passed on to customers, but it could be as little as $3 per flight.

“Virgin Australia will not be able to absorb the additional costs of the price on carbon and consequently these costs will be passed in full to consumers,” stated the company.

“Initial modelling indicates an average domestic fare increase per flight sector of approximately $3 which will vary depending on sector length.

“It is too early for us to accurately forecast the impact of passenger demand as a consequence of the carbon price regime. Any change in fares as a result of the proposed price on carbon will be communicated to customers.”

Retail

Peak retail industry body the Australian Retailers Association (ARA) says the Carbon Tax announcement spell ‘disaster’ for the retail sector.

Executive director Russell Zimmerman says the flow on effects of the Carbon Tax will see price impacts passed through the supply chain and ultimately end with an already ‘price-sensitive’ consumer market.

“Retailers are at the very end of the manufacturing and supply chain, and cost increases along the line will ultimately be caught by them. The Government’s planned Carbon Tax fails to offer retailers any compensation for being the catchment point for price rises leaving them no choice but to pass these costs onto customers,” he says.

“There are too many households that will miss out on any compensation at all as a result of an estimated $9.90 increase per week in the cost of living. Tax cuts averaging $10.10 per week for only 40 percent of households leave little margin for error and don’t go far enough.

“Retailers have concerns that the price impact on the cost of goods has been underestimated and industry needs to see more detail on how that modelling was determined.”

Zimmerman says retailers are calling for a mechanism put in place to ensure the Government’s final estimated CPI increase is not exceeded once a Carbon Tax is in place.

Despite these concerns, he has applauded the government’s $40 million Low Carbon Australia scheme, which provides information to small businesses on how they can reduce their energy costs.

“As an industry, retailers are high energy users especially when refrigeration costs are taken into account, and so we look forward to working with government to help inform smaller retailers on how they can reduce their energy costs and remain viable under such a significant economic development towards a reduction in carbon emissions,” he says.

Kickstarting a carbon economy

The Green Building Council of Australia (GBCA) welcomes the Australian Government’s carbon price scheme, Securing a Clean Energy Future, but says more needs to be done to capitalise on the opportunities of Australia’s built environment.

“The carbon price, backed by complementary measures, can lead to better-informed building choices, with less efficient, more carbon-intensive developments being overlooked in favour of well-designed, more-efficient, healthier and more productive buildings and communities,” says GBCA chief executive Romilly Madew

“The Australian Government’s proposed carbon price of $23 per tonne has been long-awaited by the GBCA, as we believe it is one of the most efficient and cost-effective ways for Australia to meet its international carbon reduction targets, while at the same time boosting investment in green technologies and stimulating new sectors of the economy.

“However, as buildings are responsible for 23 per cent of our greenhouse gas emissions, a carbon price scheme must be complemented by a range of integrated measures that support greater energy and building materials efficiencies within the property and construction industry.

“As we have long maintained, these complementary measures should include energy efficiency incentives such as tax breaks and white certificates, investment in research, development and commercialisation of low-emissions technologies, and mandatory disclosure.

“Strong collaboration between government, industry and non-government organisations has also been identified as required to overcome the current market failures and skills gaps.”

How will the carbon tax affect your business? Email [email protected]