Australian carbon tax to hit food sector hard, industry body says

By Ankush Chibber

- Last updated on GMT

Related tags: Australia

Australia's carbon tax will hit food sector hard
Australia's carbon tax will hit food sector hard
The Australian Food and Grocery Council (AFGC) has said that operating profits of Australia’s food manufacturers are expected to fall by an average of 4.4% in 2012-13 because of the Federal Government’s carbon tax.

Australia's carbon tax legislation passed its biggest political hurdle last week when the Lower House of Australian Parliament voted in favor of the law, even though it angered many business sectors, including the food industry.

The AFGC revealed that it had commissioned research firm A.T. Kearney into investigating the impact Australia's AU$23 per tonne carbon tax, would have on food and grocery companies.

The Kearney review, the council said, found that the tax would heavily impact the sector’s capacity to employ and innovate, at a time when it is already reeling from high input costs, cheaper imports, and a price war between supermarket chains.

The statement said that the carbon tax will be a “real hit” for profits, with expected losses in profitability of more than 11% for dairy and meat products.

AFGC chief executive Kate Carnell said although the food industry supports a price on carbon and many companies are already reducing their carbon footprints, the timing of the tax has been a big blow.

“The carbon tax will increase the cost of Australian manufactured goods – but will not affect imports, which are already cheaper due to the high Australian dollar. This will ultimately impact industry competitiveness affecting its capacity to employ, innovate and invest,” ​she said.

Carnell said that to maintain its competitiveness, the Australian food industry would need to upgrade plant equipment and invest in low emissions technology to use less energy and become more efficient.

“To enable this to occur, the industry urges the government to improve the business case for investment and innovation [in green technologies] to encourage companies to improve their manufacturing operations rather than moving offshore, which will impact local jobs,”​ she added.

A.T. Kearney vice president and partner Jeremy Barker said that the food sector’s ability to accommodate additional costs at this time is limited, given the industry was, on average, already experiencing poor levels of profitability.

Barker added that most companies have some form of energy reduction plans in place and are actively looking to reduce their direct emissions, “but they are limited in their ability to manage cost increases in the inputs and services they buy, such as electricity, fuel, transportation and packaging.”

Related topics: Policy, Oceania, Supply chain

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