Australian Chamber of Commerce and
Industry
 |
 |
 |
 |
 |
|---|
|
|
Australian Chamber of Commerce and
Industry |
|||||
|
|
Securing SMEs in Australia Low Carbon Future
SMEs are the engine room of the Australian economy, employing approximately 64 per cent of Australia’s private sector labour force and producing nearly 50 per cent of Australia’s domestic output. However public policy debate on the CPRS since last year has been concentrated almost exclusively on Emission-Intensive Trade-Exposed industries, coal-fired electricity generators and on consumers. Limited attention has been given to how the CPRS will affect other trade-exposed sectors within our economy such as the food processing industry and the plastics and chemicals manufacturers, or what measures need to be taken to deal with the loss of competitiveness in these sectors. ACCI commissioned this study to fill this gap. The study, titled Securing SMEs in Australia’s Low Carbon Future, authored by international economics consultancy Castalia Strategic Advisors, looks at a snapshot of SMEs in three sectors: food processing, plastics and chemicals, and machinery and equipment manufacturing industries. The study argues that SMEs, particularly those involved in manufacturing, face prices set in international markets due to import price parity. As a consequence, trade-exposed SMEs have limited opportunities to pass the costs on to their customers, but most are not eligible for assistance under the proposed CPRS transition package. Increases in energy and transport costs will impact directly on SME employment and profitability. Examining a random sample of SMEs’ cost and revenue structures as well as company balance sheets in detail, the study finds that the CPRS in its current form will generate additional costs that would erode firm profitability between 4 to 7 per cent on average. In order to compensate for the erosion in profitability, the study shows that:
Given that the negative impact on firm profitability could be significant enough to change investment incentives, in order to compensate for the erosion in profitability the study shows that firms would likely need to reduce labour costs either through lower wages or lower employment. Table 1 below presents a summary of the findings for each covered sector:
The Australian economy is particularly vulnerable to unilateral carbon pricing due to a greater dependence on international trade than many other countries. Most of Australia’s major trading partners are unlikely to adopt carbon pricing on the same timeline as the CPRS. Australia’s proposed CPRS coverage is also more ambitious than emissions trading scheme (ETS) designs being pursued in other countries. The results of this study show that there is much work yet to be done on the design of the CPRS to achieve the right balance between the intended environmental benefits, and the unintended economic consequences. ACCI will continue to constructively advocate changes to an Australian CPRS so that it better reflects our economy and place in the world. ACCI media release and The Securing SMEs in Australia’s Low Carbon Future Executive Summary and the full report are available below:
|
