Carbon tax Price rises questioned by food manufacturers

Posted July 11, 2011 08:43:00

The Government says the weekly grocery bill will rise by 80 cents a week under the carbon tax. But the Australian Food and Grocery Council says it has trouble believing that figure.

Source: AM | Duration: 3min

Topics: industry, australia


TONY EASTLEY: Prices will rise under a carbon tax and retailers are now working out the size of those increases.

The Government says weekly grocery bills will rise by just 80 cents a week in the first year of the tax.

The peak body for the major supermarkets has agreed that there's likely to be only a nominal rise in food prices because of the tax but food manufacturers have questioned the Treasury's calculations.

Here is Lexi Metherell.

LEXI METHERELL: Treasury says households will feel the biggest effect of the carbon tax in its first year, when the average cost of living will rise about ten dollars a week.

Retailers, like Myer's chief executive, Bernie Brookes, are now running the ruler over the Government's estimates to see how they stack up.

BERNIE BROOKES: Well, I think generally the impact on our business will be a couple of per cent, so therefore our prices will have to move a couple of per cent to respond.

LEXI METHERELL: The Treasury figures suggest in the tax's first year, grocery bills will rise by 80 cents a week.

Margy Osmond is the chief executive of the Australian National Retailers Association, which represents big chains like Coles and Woolworths.

MARGY OSMOND: Any price rises in this space are much more likely to be the product of what happens with the manufacturers of the food products and certainly we wouldn't expect to see very large food increases at all.

LEXI METHERELL: As part of the package, food manufacturers will receive $150 million to become more energy efficient.

The head of the Food and Grocery Council Kate Carnell welcomes that but is perplexed by how the Government calculated the rise in food prices.

KATE CARNELL: There'll be increased costs on farms, increased transport costs, increased packaging costs, increased factory costs - the list goes on and really we would have trouble believing the Government figures.

LEXI METHERELL: But the ANZ's chief economist is Warren Hogan says the figures do add up.

WARREN HOGAN: The modelling and everything looks reasonable. It's a very similar exercise in a lot of ways to some of the other reforms we've seen in Australia such as the GST.

LEXI METHERELL: He says the effect of the tax on households will be limited, because they'll be compensated. Part of that will involve lump sum payments to millions of households just before the tax starts mid-next year.

WARREN HOGAN: The nature of the up-front payment is not only very savvy on the Government's part but that really will reinforce that message that you are being compensated for this, you're going to get the money in the bank ahead of the introduction of the carbon tax.

LEXI METHERELL: Margy Osmond of the Retailers Association says its important consumers understand that for the most part, they'll get refunded for the higher costs associated with the tax.

MARGY OSMOND: How the message is sold will be critical. Consumers need to have a sensation that this is a concern they can tick off their list of things that are making them feel nervous about spending.

LEXI METHERELL: But Myer's Bernie Brookes says a new tax is hard to sugar coat.

BERNIE BROOKES: Regardless of the message that comes out that there will be tax benefits, the reality is that price of things will go up and therefore people will see it as an additional GST and they will doubt whether they're going to be fully compensated for it.

TONY EASTLEY: The chief executive of Myer, Bernie Brookes, ending Lexi Metherell's report.