Australia’s building and construction industry has effectively been sidelined and forgotten in the debate surrounding the carbon tax, a key industry group says.
Master Builders Queensland director of housing policy Paul Bidwell says that while the introduction of the tax on July 1 this year has received significant media and political attention, his organisation had been ‘surprisingly unsuccessful’ in shedding a spotlight on issues surrounding the impact of the tax on housing affordability and costs.
“Unlike some industries, the building and construction sector is in a unique position – it is neither emissions intensive nor trade exposed.” Bidwell says. “However, despite direct emissions from the industry being quite low in comparison to other sectors, the price on carbon will have a significant impact because the sector uses many emissions intensive inputs, such as cement, bricks, aluminium, steel and glass.”
Bidwell acknowledges that the impact of the tax on construction costs for different buildings will vary according to a number of factors, such as the materials used, the size of the building, it’s location and ultimately, the customer.
He also recognises that the government’s compensation package will offset some of tax’s impact.
Nevertheless, he says, building costs are set to rise, impacting not only profit margins – to the extent to which costs cannot be passed on – but also demand.
Confusion Reigns
Along with the extra compliance burden on builders, the tax is causing legal headaches for some firms due to requirements that any carbon-tax related increase in contract prices be fully substantiated.
In light of the fact that many suppliers, manufacturers and distributors are not certain how the carbon tax will affect their prices, Bidwell says, determining the exact costs of the tax on individual contracts is difficult.
“You would think it is straightforward to pass on these additional costs,” he says. “However, builders have been placed in a tough position. Unless they are very confident of their estimates and can attribute the cost increase directly to the carbon tax, they cannot increase contract prices with the explanation that the increase is to cover the carbon tax.”
Bidwell added that the new tax could lead to builders acting illegally even as they try to follow the law.
“Where price increase claims cannot be fully substantiated, builders run the risk of breaking the law and running afoul of the Australian Competition & Consumer Commission,” he said.
As for how the tax will impact upon the industry as a whole, Bidwell says estimates vary. The Centre for International Economics (CIE) expects overall building and construction costs to rise by between 1.4 per cent and two per cent. Allen Consulting Group estimates it will cost an around $3,800 more to build a model two-storey, detached brick veneer 200 square metre house.
