Monday, August 20, 2012

Butchering the Carbon Tax

The Courier Mail today runs the story of young Brisbane butcher Luke Stefanetti, who is having to increase his retail prices by 15-20% in order to maintain his profit margins. Luke is convinced that the Carbon Tax is the single driver that has forced him to raise his profits.

The Courier Mail has chosen – perhaps wisely – not to open comments on this story. If the story was open to comment, we would see everything posted, from misinformed agreement with Luke’s conclusions, to caustic comments about his inability to run a business. I would have liked to have added my comments to the original story, because in a nutshell, I’m not convinced by this piece that the butcher or the journalist know much about the Carbon Tax.

Perhaps they could’ve referred to this basic but handy guide to the Carbon Tax, published in today's News Limited Online editions. (See below). There are a few points here that Luke, and all small business owners, need to know.

In Luke’s case, the most important point is that point is that farmers do not have to pay Carbon Tax, and in fact, they may receive Carbon Credits under the Carbon Farming Initiative. Of course, some farm inputs will be supplied by large polluters, and could be liable for C-Tax – electricity and fertiliser are two examples – but we can’t assume that just because a company is a top polluter and is liable to pay the carbon tax, that they will pass any increase onto customers.

The point is, those big polluters are supposed to pay more under the Carbon Tax. It’s the big stick to encourage them to invest in greener solutions. People like you and me get a tax cut to help us manage the C-Tax, and small businesses like Luke’s Butchery get assistance too.

Luke says that meat prices are going through the roof. Does he mean the wholesale price he pays his supplier? Or the supermarket retail prices? It sounds to me as though someone’s prices are going up and they’re blaming the C-Tax.

Transport costs was another area where Luke feels he’s being hit by the Carbon Tax. It’s probable that he is paying more for transport costs. How much is impossible to say, as we don’t know how much is being transported, or how, or how far the product is being moved. Luke’s business, as a small business, would be exempt from the carbon price on fuel.

One of the things that worries Luke most is his electricity costs. In a C-Tax world, between 9-11% of his electricity bill will the result of the Carbon Tax. According to the Courier mail, his electricity costs are around $3000/month. He should expect a rise of between $270-$330 per month due to the Carbon Tax. No his electricity bill will increase more than that, as it has for each of the past several years, yet these increases will not be attributable to the Carbon Tax. This should be displayed on each bill. Luke should also be investigating assistance from the government. There’s help available – for example, his large electricity usage would qualify him for a 50% rebate on an energy assessment plan to help him become a more efficient user of electricity. He’d not only save money on the assessment; he’s also save money on every single electricity bill if he implemented the recommended changes.

In the meantime, Luke’s 15-20% increase appears to be far above where it should be. I don’t know much about what meat costs, but we could assume that a family might spend $50 per week on meat. That’s an increase of $7.50 - $10 per week, using Luke’s retail increase of 15-20%. Calculating the impact of the C-Tax on a small business is a complex process of financial modelling, and really, he’d be far better talking to his accountant than to a journalist. Comparing that increase to the government’s modelling, I’d suggest Luke is being ripped off. He’s not alone, but this article has some very important tips for nailing down pricing.

Luke needs to grow up and take responsibility for his business. If he is struggling because the things he has to buy (meat, packaging, electricity, transport, staff) cost more, he needs to get quotes from other suppliers, and he needs to understand why prices are rising. A price rise in the area of 15-20% because of the Carbon Tax is the kind of price movement that will see him noticed and investigated by the ACCC. If he’s being ripped off by a supplier, he should know that, too, and consider if he wants to continue to business with them.

It’s possible that Luke is totally on top of all of the C-Tax issues, and that it’s the journalist who has made him look incompetent. In that case, I’d like to see the figures – and I’ll bet the Government would too. Yet even if Luke is a world authority on C-Tax, there’s no getting past this little gem:

Luke told the Courier Mail:

“He didn't vote in the past federal election but says next time around, if he had to vote he would vote for the Coalition and support their promised removal of the carbon tax.”
He does have to vote, because it’s compulsory in this country. He should’ve voted in the last election too, but he chose not to, and was lucky not to be fined. He has no comeback. Decisions are made by those who show up. If you choose not to vote, you have no right to complain about the government.

Perhaps Treasurer Wayne Swan, who is also Luke’s local member, could pop around and explain a few of the details that Luke seems to be struggling with and run through the numbers with him. It’d make a great case study on the Carbon Tax meeting Real Life.


  1. Excellent & very true! BruceC01.

  2. Hi, I'm glad I found your blog, because I too would have liked to reply to the Courier Mail article. As we know electricity prices will rise by about 10%, diesel for large vehicles isn't subject to carbon pricing until 2014, and smaller trucks and cars aren't liable at all. And as you say Farmers don't pay either.

    So how does the butcher's costs rise by 15-20% due to the carbon tax?

    The interesting part you pointed out at the end is that he intends to vote coalition next time, obviously to avoid higher costs. But the coalitions plan is expected to cost far more, not to mention the cost of unwinding the ETS, paying compensation to permit holders, and the costs of other promises such as unwinding the NBN, the mining tax and imposition of taxes to pay for parental leave schemes.

    Poor Luke doesn't know what he is voting for, but he is young and confused.