The food processing industry says shoppers will not suffer any price rises under the proposed carbon tax because the impact will be borne by manufacturers.
The Opposition Leader, Tony Abbott, has repeatedly used the Australian Food and Grocery Council’s earlier estimate of a 3 to 5 per cent price hike on food due to the carbon tax during his anti-carbon tax campaign warning of imminent price increases.
But releasing new modelling yesterday, the council said the impact would not hit household shopping bills, because the highly competitive food retailers would not allow the price rises to flow through.
”It is very unlikely food processors would be able to pass on any rises in costs in this depressed retailing market and with a supermarket price war underway,” the chief executive of the council, Kate Carnell, said.
Instead, modelling for the council by A. T. Kearney has found food processors would suffer a hit of about 4.4 per cent to their operating profits, rising once trucking fuel was included in the carbon pricing scheme. Some sectors would suffer more, with dairy and meat processors losing almost 10 per cent of their operating profits before tax.
Food processors can apply to a special $150 million fund to help with investments to reduce their emissions, but according to the council that isn’t enough to encourage investment by manufacturers struggling with the high dollar and competing with cheaper imports.
”It is a very difficult time for manufacturers right now … the food processing fund requires an investment of $3 for every $1 of government money, in these circumstances that doesn’t make the business case stack up for investment in Australia,” Ms Carnell said.
”We’d like to see some sort of short-term accelerated depreciation scheme or other incentive for investment.
”Something that really helps the business case for factory upgrades.”
The federal treasury’s modelling, which assumed the carbon tax was entirely passed through to consumers, forecast price rises of less than 0.5 per cent, or 80 cents a week for the average shopping bill, of which processed food is one part.
The earlier Food and Grocery Council modelling, which predicted price rises of $2.40 a week or $120 a year, used different methodology and was based on the Rudd government’s carbon pollution reduction scheme.
Food manufacturers employ 312,00 people. The council is not claiming the carbon tax would be responsible for imminent job losses but says it ”will ultimately impact industry competitiveness, affecting its capacity to employ, innovate and invest”.
The study said most companies had some form of energy reduction plan in place but were limited in their ability to manage cost increases in electricity, fuel, transportation and packaging.”
