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Cold chain operators warn of food inflation impacts

RWTA chief casts doubt on carbon tax modelling while operators with fleets and warehouse face double hit

By Rob McKay | July 12, 2011

Food prices will have to rise by more than predicted due to carbon tax-related impacts, the Refrigerated Warehouse and Transport Association (RWTA) warned today.

Others in the sector fear the carbon tax’s impact on supply chains.

With extra electricity costs to arise, on top of those already in the system due to delayed infrastructure upkeep and renewables initiatives, association members will be amongst the hardest hit, according to RWTA National Chairman Peter Quinn.

Those in the refrigerated industry with transport services face a double-whammy, with the rising cost of diesel also to be boosted when the fuel tax credit rate falls in 2014.

“Their costs are going to go into the price of fuel as well.”

On the projected extra cost on food, put at about 80 cents a week, Quinn says: “I don’t know where the modelling comes from for that but it’s going to be more than that.”

Quinn’s view echoed that of Australian Food and Grocery Council CEO Kate Carnell on ABC Radio yesterday.

“There’ll be increased costs on farms, increased transport costs, increased packaging costs, increased factory costs – the list goes on and really we would have trouble believing the Government figures,” Carnell told the AM program.

Carnell has pointed out that the Treasury modelling on the cost of food has not been released.

However, this was contradicted by ANZ Chief Economist Warren Hogan, who backed the government’s modelling.

“The modelling and everything looks reasonable. It’s a very similar exercise in a lot of ways to some of the other reforms we’ve seen in Australia such as the GST, Hogan says.

Quinn says there are significant differences.

“When the GST came in, everyone really understood the implications,” he says of what was a direct tax.

“There was no question that it was going to go on to the price of everything.

“And it didn’t require a massive bureaucracy to collect it.

“This tax is a compounding tax and it’s not going to do what it set out to do.”

Quinn warns that his sector, as a necessarily high user of electricity, will struggle to offset the increasingly high costs.

“Power has gone up for all the wrong reasons to date,” he says.

“It’s gone up because of the interference in the free market by governments that have decided to introduce and promote renewable energy that is never going to do the job for people using huge quantities of base-load power.

“Prices have already been forced up by that impost, which is just another form of tax, and now we’ve got the direct carbon tax on top.”

With a fleet of 70 trucks, Charter Freightlines Storage CEO Paul Campbell is another with deep concerns.

“From an interstate hauliers point of view, most of us run modern trucks – Euro 4 or Euro 5,” he says.

“Imposing a carbon tax on us isn’t going to change anything because we’ve always pursued current technology.

“It’s a broad-brush approach for a problem that is more complex than that.

“So, for me, it’s purely just a revenue-raising issue because of the technology in the highway fleet.”

Campbell, whose firm is headquartered in Prospect near Parramatta, sees the impact as being inflationary as the costs flow through the economy.

“It is a double whammy, it’s a two stage approach,” he says.

“Next year, all our suppliers will be hitting us with the impacts on them, which we will pass on.

“The second stage of it is when we take a direct hit in our fuel costs.

“There’s no way in the world we will absorb the extra costs.”

He is also concerned for the viability of customers who are exposed to food imports and has identified a manufactured seafood firm and a confectionery manufacturer as particularly at risk from overseas competition.

In a point similar to one made by Oxford Cold Storage Director Paul Fleiszig in the July edition of ATN, Campbell warns of the impact of food inflation on internal Australian supply chains.

“The minute they import product and go direct to destination – deliver straight to Sydney, Melbourne, Brisbane – I’m out of a job,” he says.

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