Energy costs up 14.5% for small business after carbon tax: Report

Energy costs for businesses have risen on average by 14.5% following the introduction of the carbon tax, according to new research by the Australian Industry Group.

The report, released today, found an increase in costs was consistent across all business sectors, but the distribution was uneven, with food manufacturers hit particularly hard.

The report was the result of a multi-stage research project that surveyed 485 businesses at the end of November, 2012.

For food manufacturers, the report was troubling, with 90% reporting immediate rises in their input costs due to the carbon tax.

A spokesperson for the Australian Food and Grocery Council told SmartCompany that while the AI Group report provided a good early indication of the costs of the carbon tax, it was too early to determine the real costs until the end of financial year.

“It’s a little bit too early to examine it at this stage… while the AI Group report provides a good indication of the costs of the business impacts of the carbon tax, there will be a better opportunity at the end of the financial year.

“More broadly, as an industry, our sector is experiencing difficult trading conditions like all other manufacturing.

“Last year, according to that state of industry report, the total industry output contracted by 4.5% in 2010-2011, while total industry employment declined by 2.2%, almost 7000 people in 2011-2012,” the AFGC says.

In other industries, manufacturing businesses reported an average increase of 14.5%, service providers a rise of 13.6% and for construction companies their energy bills grew by 14.8%.

But despite the evident cost increases, AI Group chief executive Innes Willox warned in a press release businesses are overestimating the impact of the carbon tax on their energy cost increases in the past year.

“In the November survey, manufacturing businesses attributed close to 85% of their total electricity cost increases over the past year to the carbon tax, whereas data from other sources suggests that, at least for many smaller businesses, the contribution of the carbon tax to total energy price rises was probably closer to one half,” Wilcox says.

The carbon tax, which was introduced on July 1, 2012, was the subject of protests and debate around the country.

One hot topic was the potential for businesses to pass on costs to consumers, causing the already high cost of living to rise.

But the AI Group report has found businesses have been largely unable so far to pass on costs to consumers because of strict regulations, placing an even tighter squeeze on small businesses.

“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 % of businesses intended to pass of their increased costs.

“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,” Willox says.

The AFGC says the food manufacturing industry especially has struggled to pass on costs to consumers because of retail price deflation.