More than four in ten businesses in the building and construction industry say they intend to raise selling prices immediately in response to cost increases relating to the carbon tax, a survey has found.
In an Australian Industry Group Survey marking the start of the carbon tax, 42 per cent of 621 respondents across the manufacturing, service and construction sectors have indicated they will try to immediately put up their prices.
- 40% of manufacturers
- 40% of service providers
- 44% of businesses in building and construction.
Furthermore, Ai Group Chief Executive Innes Willox says the weak market conditions in building and construction will act as a barrier to increasing prices, notwithstanding the increase in costs associated with the new tax.
“Plans to recover cost increases appear to be influenced by two broad considerations: the extent to which the business is trade exposed and the current market situation facing the business,” Willox says. “For instance, although building and construction is not trade exposed, the deep slump facing large parts of this industry is likely to inhibit the ability to pass through costs.”
Willox says the survey also brings into focus confusion about the role of the Australian Competition and Consumer Commission (ACCC) in monitoring carbon tax increases.
Willox says the Government has directed the ACCC to take a role in relation to claims made by commercial parties about the impact of the carbon tax, and that the ACCC will seek to ensure businesses do not make misleading claims about price increases as a result of the tax.
Importantly, he notes, the ACCC does not have a role in formally monitoring, setting or restricting price increases linked to the tax and the ACCC has no power to prevent a business from putting up its prices as a result of the carbon price.
“In short, the ACCC’s role is not about preventing legitimate cost flow-through but relates to misrepresentations about the impact on prices of carbon-tax related cost increases,” Willox says. “Businesses need to take particular care not to overstate the impact of the carbon tax in negotiating price increases.”
The latest survey comes amid increasing pessimism within the building and construction industry about the impact of the new tax.
In a recent Master Builders Australia survey of 526 builders across the commercial, residential and engineering sectors, no fewer than 88 per cent of those polled believed the tax would hurt their business over the next 12 months.