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Local manufacturing hangs in the balance

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Federal Government plans to introduce a price on carbon continue to stir heated debate. So it’s a good time to weigh up the consequences Australian manufacturers may face, if-or when-a scheme is implemented. Australian manufacturers have a lot to be proud of. The products they make are renowned worldwide for being innovative and high quality, and in the case of food products, clean and great tasting. The Government intends to introduce a carbon price on 1 July, 2012 for three to five years before switching to an emissions trading scheme (ETS).  The objective behind this is to shift businesses using coal-fired energy to cleaner energy sources and thus cut pollution. But this framework could have a detrimental impact on two fronts: business competiveness and relocating polluting activity to another part of the world. Australian manufacturers are already facing steep competition from the strong A$, higher interest rates and imports from low-cost countries. Add to this the significant increases on power costs a carbon tax is expected to result in and it could be a very costly experience. Businesses would need to pass on the impact of higher energy costs and their competitiveness will be reduced. And as we’ve seen so often in the past, once manufacturing locally is deemed unviable it is taken off-shore - remember the Pacific Brands case just three years ago? And in terms of pollution, this would just be a case of passing the buck - not addressing our responsibility for the environment, but simply relocating the activity to another part of the world; and if it is to a country with lower standards and emission controls than Australia, probably with increased negative results. It is fundamentally important that the Government properly understands and values the role the manufacturing sector plays in Australia - wealth creation, export income and jobs, particularly skills training for young Australians. We need to invest in its future, not erode its global competitiveness.

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