Costs to soar as new tax kicks in

Costs to soar as new tax kicks in

Prices for many household items will rise immediately as companies try to pass on costs as the $23 per tonne hit from the carbon tax makes their electricity more expensive.

The Australian Industry Group said almost half the company directors surveyed said they would put up prices from today, the first working day under the new regime.

The biggest rises are expected from companies involved in communications, retail and transport while cafes and restaurants were less likely to pass on the costs to consumers.

The government is pouring in compensation for households and said yesterday consumers should be alert for price gouging and should question price rises which are being wrongly attributed to the carbon tax.

While ministers mocked the opposition’s predictions of doom and gloom, Labor said it might “tweak” the tax if unforseen problems arise, following the example of John Howard’s changes to the GST.

As the political debate reached a new intensity, the government emphasised the historic nature of the change to a carbon tax and the compensation to households for the expected rise in the cost of living.

However, the opposition predicted the new tax would “play havoc” with household budgets as food, electricity and gas all cost more.

The Liberal Party launched a major advertising campaign, accusing Prime Minister Julia Gillard of lying about the introduction of the carbon tax.

Opposition Leader Tony Abbott stepped up his “truth campaign” and again threatened a double dissolution election if the Coalition won the election and Labor and the Greens resisted the repeal of the tax.

He said electricity prices would rise massively under the carbon tax and launched a billboard where he confirmed the first act of an incoming Coalition government would be to repeal the carbon tax.

“There are five major new bureaucracies that are being created as a result of this carbon tax and we don’t need those bureaucracies without the carbon tax,” he said.

Ms Gillard challenged Mr Abbott’s pledge to repeal the tax, saying that, as with the GST, there would be no going back once it was in operation.

“The only thing that is sure about Mr Abbott’s promises is he has promised and confirmed today that the tax cuts you are seeing for the first time this week will be taken away by him if he’s ever prime minister . . . All the rest will degenerate into a fiddle and a fudge,” she said.

Ms Gillard made it clear she hoped the row would calm to allow her to push the government’s other changes, such as the national disability insurance scheme.

Climate Change Minister Greg Combet predicted Mr Abbott “can’t and won’t” axe the tax if the Coalition won the election.

The Accommodation Association of Australia warned of rising prices for travel and accommodation, estimating the impact to be up to 3 per cent.

Mr Combet said this was an exaggeration because Treasury modelling had indicated an average impact of 0.5 per cent across all households, or 30c per week, for travel and accommodation.

“On average households will receive $10.10 a week in assistance 2012-13 to help with the modest price impacts of the carbon price,” he said.

“If businesses make false carbon price claims they run the risk of breaching the Competition and Consumer Act and could be exposed to a $1.1 million fine for misleading consumers.”

Mr Combet went to Whyalla to ridicule Mr Abbott’s prediction that the steel town would be wiped off the map by the carbon tax.

While the $23 per tonne tax will be paid by 294 firms, ? trade-exposed companies will be protected.

AI Group chief executive Innes Willox said businesses should be clear about the role of the consumer watchdog. “The ACCC [Australian Competition and Consumer Commission] does not have a role in formally monitoring, setting or restricting price increases linked to the carbon price and the ACCC has no power to prevent a business from putting up its prices as a result of the carbon price,” he said.

“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.

“Businesses need to take particular care not to overstate the impact of the carbon tax in negotiating price increases.”

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