News of the Gillard Government introducing its carbon pricing package has been dreaded by many retailers.

But now that it’s finally here, it will mean two things for retailers – increase in operation costs throughout the supply chain and fewer goods being bought as a majority of households will be reluctant to spend as the cost of goods and living expenses will be increased.

The Australian Retailers Association (ARA) executive director Russell Zimmerman said poor retail trade indicated consumers were already extremely price-sensitive, reigning in their spending due to increased pressure on household incomes and this will only increase due to the flow on effects of the carbon tax as price impacts are passed through the supply chain culminating at the retail checkout.

“Retailers are at the very end of the manufacturing and supply chain, and cost increases along the line will ultimately be caught by them. The Government’s planned Carbon Tax fails to offer retailers any compensation for being the catchment point for price rises leaving them no choice but to pass these costs onto customers,” he said.

According to the Australian Food and Grocery Council (AFGC) chief executive Kate Carnell, the increase cost throughout the supply chain will be due to the increased costs of power.

“The Government carbon tax will increase the cost of Australian manufactured goods – but will not affect imports, which are already cheaper due to the high Australian dollar,” Carnell said.

However, transport fuel has been excluded for the tax until 2014, which will help offset supply chain costs for heavy on-road vehicles in transporting food and groceries.

Meanwhile, petrol, diesel and LPG used in light vehicles, which are often operated by private motorists and small businesses, will remain carbon tax-free.

Despite these concerns, Zimmerman has applauded the government’s $40 million scheme to provide information to and small businesses on how they can reduce their energy costs and recognition for carbon neutral businesses through Low Carbon Australia scheme.

“As an industry, retailers are high energy users especially when refrigeration costs are taken into account, and so we look forward to working with government to help inform smaller retailers on how they can reduce their energy costs and remain viable under such a significant economic development towards a reduction in carbon emissions,” he said.