Australian food industry chews over bitter carbon tax

By Kacey Culliney

- Last updated on GMT

Australia's carbon tax: A costly move for the food industry says AFGC
Australia's carbon tax: A costly move for the food industry says AFGC

Related tags: Australia, Industry, Australian food and grocery council

Australia’s carbon tax will hit the food industry hard with imports likely to be favoured in light of unavoidable price spikes, the Australian Food and Grocery Council (AFGC) has said.

Australia implemented its long-awaited, long-discussed ‘carbon tax’ on Sunday July 1, 2012 as planned in a move it dubbed as a “major milestone in its plan for Australia’s clean energy future.”

“A carbon price will create incentives for large emitters to reduce carbon pollution,”​ the government said on Sunday in a statement, “it is a responsible economic reform.”

Polluters will pay A$23 per tonne of carbon released and this price will gradually increase until 2015, when the government will shift to a trading scheme to allow the market set the cost.

The aim is that by 2020, the country’s carbon pollution will be at least 159m tonnes less each year.

However, Dr Geoffrey Annison, acting chief executive officer for the Australian Food and Grocery Council, said that this policy will prove costly for Australia’s already fragile food manufacturing industry.

Food prices will suffer as manufacturers need to ‘pass on’ costs, Annison said.

While food manufacturers want to avoid passing on these costs, and will improve efficiency where they can, “the whole point of the policy is to allow the tax to flow down the supply chain including to the consumer to provide effective market signals,”​ he said.

“The unfortunate thing is that in passing on the price rises, manufacturers risk becoming less competitive compared to imports which don’t carry the burden of the carbon tax,”​ he added.

Imports are already cheaper due to the high Australian dollar, Annison said, and “if consumers choose these products over more expensive local products, how can we maintain an Australian food and grocery manufacturing industry?”

“This tax will impact industry competitiveness, affecting its capacity to employ, innovate and invest and may cause manufacturers to look elsewhere to produce their products,”​ he said.

Adding to an already difficult market

On the contrary, another manufacturing group Business for a Clean Economy, has said the tax will drive innovation and thus ensure a high level of competition on an international level.

However, this group is predominantly made up of biofuel companies, arts and crafts firms, and sustainable solutions firms. It only contains one food giant – Unilever – and a handful of organic and gourmet food processors.

Australia’s food industry has already been battling high input costs, and price wars between supermarket chains for some time and in October 2011 the AFGC commissioned an independent review to investigate the impact the carbon tax would have on food and grocery companies.

‘The Kearney Review’ suggested the policy would hit the industry hard, notably in profits with losses of more than 11% forecast for dairy and meat products.

Under the Australian carbon tax law, manufacturers are able to apply for government grants to help absorb the costs of becoming more energy efficient, but Annison said, “this may not be sufficient to negate the substantial impact of carbon tax.”

Related topics: Policy, Oceania, Supply chain

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