Small & Medium Businesses Will Be Worse Off Under A Carbon Tax
14 June 2011
Australia's largest and most representative business organisation, the Australian Chamber of Commerce and Industry (ACCI) says the modelling released today by the coal industry indicates some 14,100 non-coal jobs could be lost with the adoption of a carbon tax. The Report highlights the widespread impact of the tax as many of these jobs would be provided by small business operators in regional areas where economic opportunities may otherwise be very limited.
ACCI's Director Economics and Industry Policy Greg Evans said, "small business is set to do it tough on all fronts and faces the prospect of a doubling of electricity prices by 2015 and according to energy providers perhaps a quadrupling of tariffs by 2020. This increase is attributable in most part to carbon pricing and other mitigation measures including the network and distribution upgrades necessary to cope with the new arrangements."
"While some households may be partially compensated for the increasing cost of living and selected industries may be assisted to an extent, small and medium sized enterprises (SMEs) are set to be left out in the cold once again as they were under the CPRS framework and will bear the full brunt of cost increases in the form of higher energy prices and higher input costs."
"SME’s range across many sectors and have varying degrees of exposure to escalating energy costs however in many instances they are trade exposed, or have limited market power consequently they have no capacity to pass on higher energy prices or the higher cost of other inputs."
Therefore their earnings and competitiveness will suffer as will jobs and expansion opportunities. The sector is particularly vulnerable as:
- SMEs are likely to have already realised the affordable energy efficiency gains in their businesses in order to remain competitive
- SMEs are thinly capitalised and unable to cope with even marginal cost increases
- Diminished profits will reduce the return on capital and labour
"In the medium term, the impact of a carbon tax on the SME sector is likely to be on both investment and employment. However, the immediate impact is likely to fall disproportionately on employment as SMEs adjust to the new tax burden. Although previous Treasury modelling disguised this negative employment impact by assuming a decline in real wages across a number of the emission target scenarios, Greg Evans said.
"Thousands of SME’s also have linkages to the large scale trade exposed sector across resources, energy and manufacturing sectors such as the steel and food industries. Hurting the international competitiveness of these businesses also hurts small business either through the loss of contracts or orders or through flow on impacts."
"In particular today’s economic study from the coal industry reminds us of the significant impact a carbon tax could have on small businesses in regional NSW and Queensland."
ACCI maintains the view that it makes no sense in the absence of an international agreement Australia to impose a carbon tax. In this context allowing the market to deliver the mitigation of emissions through technology and efficiency measures should be the cornerstone of a response rather than a unilateral big government stick approaches," Greg Evans said.