One of the most basic economic issues overlooked when it comes to the extra cost for businesses from the carbon price is that those costs have been passed on the consumers.
It was actually how the carbon pricing scheme was meant to work as the Treasury modeling from a couple of years ago made clear.
This is why electricity prices rose – the electricity generators passed on the extra cost from the carbon price to their customers. It is the same story with the airlines and no doubt fish wholesalers and other businesses with big refrigeration units and a high proportion of their business input costs in the form of energy.
The direct impact on the net profit margin of businesses from the carbon price was so trivial it probably rounded to zero as those costs were recouped from an increase in selling prices.
This is in effect how the GST works – firms don’t absorb the cost of the GST – they add it to the bill and you and I pay it.
This is such a basic, yet largely overlooked, fact when it comes to carbon pricing.
Of course there may have been a dip in demand as the price increases impacted on consumer behaviour, but any such drop in demand appears muted outside household energy consumption. Note that real GDP growth has averaged a tick under 3 per cent in the two years the carbon price has been in place. The level of employment is 250,000 higher than when the carbon price came into effect. The fact that the value of the Australian stock market has increased by almost $600 billion (including dividends) since the carbon price has been in place smashes the notion that the carbon price is – or was – anything other than a necessary and low disruption reform. Any squeeze on profits from the carbon price would have no doubt shown up in the stock market if in fact is was a negative influence.
The bottom line is that the bottom line of businesses have not been hurt more than about one iota from the carbon price as the extra costs were recouped via higher selling prices.
Such basic concepts, so little understanding.
