Local food and grocery manufacturers will see their operating profits slide by an average 4.4 percent in 2012-13 as a result of the carbon tax, according to the Australian Food and Grocery Council (AFGC).
The AFGC said the carbon tax will impact the industry’s capacity to employ and innovate, and a carbon price of $23 per tonne will impact profits in Australia’s largest manufacturing sector.
Profitability in paper products could fall by up to 15.6 percent and over 11 percent for dairy and meat products, research by A.T. Kearney found.
The AFGC also said increased costs in energy as a result of the tax will affect every stage of production of food and groceries from on-farm to supermarket shelves.
AFGC CEO Kate Carnell said the industry supports a price on carbon, but the timing of the tax delivers another blow to already stressed manufacturers.
“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.”
To maintain competitiveness, Carnell said the industry will need to upgrade plant equipment and invest in low emissions technology to use less energy and be more efficient.
“To enable this to occur, industry urges the Government to improve the business case for investment and innovation to encourage companies to improve their Australian manufacturing operations rather than moving offshore, which will impact local jobs.”
A.T. Kearney vice president Jeremy Barker said the research highlighted the challenges facing the sector as its ability to accommodate additional costs at this time is limited, given it’s already experiencing poor profitability.
“The study found 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.”
