"The repeal of the Carbon Tax will lead to some very welcome price reductions for consumers and business but the ACCC should tread carefully in its price monitoring role," Australian Industry Group Chief Executive, Innes Willox, said today.
"Electricity prices were the main source of carbon costs for most businesses and most
households. The removal of the tax will flow through to lower electricity bills, ultimately
lowering prices by around two cents per kilowatt-hour. The timing will depend on the retailers’
hedging arrangements; terms in individual contracts; and in some cases on State price
regulators. These savings will be welcomed by energy users.
"Gas prices should also benefit from the removal of the tax, though this will be lost in the much
larger price rises driven by LNG exports from Queensland.
"However, we reiterate that there are unlikely to be significant price reductions for most goods
and services apart from energy and certain refrigerants. There is a very simple reason for
that: those prices never incorporated the carbon tax in the first place.
"Ai Group surveys of businesses in the manufacturing, construction and services sectors have
shown that those businesses were largely unable to recover their carbon costs from
customers. 70 per cent of respondents did not pass through any carbon cost at all; the
average across the sample was a cost pass-through of just 6 per cent.
"This was not unexpected. Ai Group and others have consistently highlighted the difficulty for
industry in passing on costs not faced by competitors overseas. Indeed, the whole basis of
the partial compensation arrangements for some emissions intensive industries was the
expectation that those sectors were too exposed to international trade to pass on carbon
costs.
"In short, most businesses outside the energy sector have simply absorbed the costs of the
carbon tax, in the face of intense international competition and powerful customers. That has
had an impact on their ability to employ and reinvest, but not on consumer prices.
"The ACCC consulted with business and behaved reasonably and professionally in monitoring
the initial introduction of the tax, and we expect they will do so again as the tax is removed.
But there should be no illusions that there will be big falls in prices beyond electricity charges.
"It is important to industry that the repeal legislation is passed as soon as possible to add
certainty and allow for the benefits to flow through more quickly," Mr Willox said.
