Builders to feel the pain

THE building industry has warned the federal government's carbon tax will put further pressure on housing affordability by driving up the cost of building materials.

By InvestSMART · 12 Jul 2011

By InvestSMART ·
12 Jul 2011

Comments

THE building industry has warned the federal government's carbon tax will put further pressure on housing affordability by driving up the cost of building materials.

Brickworks, the country's largest brickmaker, said the $23 per tonne carbon tax would cost the company $12.8 million in earnings before interest and tax.

It said it would try to fully recover those costs through product price increases of up to 6 per cent, but that it was also concerned the tax would lead to reduced building activity.

CSR said it also expected to increase prices in its range of plasterboard, bricks, roof tiles and fibre cement products to recover costs.

Housing Industry Association chief executive Graham Wolfe said this would have "painful and widespread repercussions" for prospective home owners.

"Housing affordability is already at a distressing level [and] new housing supply is well below underlying demand," Mr Wolfe said. "Families buying a new home will now face additional building costs and higher mortgage repayments."

Cement producer Adelaide Brighton said it would consider importing more of its material from offshore after revealing the tax could slash its net profit by about $5 million next year.

"The Australian dollar along with the carbon tax will just make us look at those options even closer," chief executive Mark Chellew said.

While heavy-polluting companies operating in the steel, cement and glass industries will all be significantly compensated under the transitional assistance provided in the carbon pricing scheme, brick makers will miss out because their industry is not trade-exposed.

Brickworks chief executive Lindsay Partridge has long argued it has been unfairly treated given it has voluntarily reduced its carbon emissions by 40 per cent through the closure of old and inefficient brick plants and investing in new energy-efficient plants. Boral has also mothballed some brick plants in Queensland.

But proponents of the government's scheme argue the tax is doing its job by forcing such changes in behaviour of the country's largest building material companies.

As the emphasis on sustainability grows, the likes of James Hardie and CSR have been pushing their fibre cement range to builders as an energy-efficient alternative.

Go to Google News, then click "Follow" button to add us.

Share this article and show your support

Frequently Asked Questions about this Article…

How will the federal carbon tax affect building materials prices for homeowners and builders?

The article says the $23 per tonne carbon tax is likely to push up building material costs. Companies such as Brickworks and CSR have warned they will raise prices to recover costs (Brickworks has flagged increases of up to 6%), so builders and, ultimately, homebuyers could face higher construction costs and mortgage repayments.

Which building-material companies are mentioned as being directly affected by the carbon tax?

The piece names Brickworks, CSR, Adelaide Brighton, Boral and James Hardie. Brickworks and CSR expect to lift product prices; Adelaide Brighton said the tax could cut about $5 million from next year’s net profit; Boral has already mothballed some brick plants in Queensland; James Hardie is promoting fibre cement as an energy-efficient option.

How much did Brickworks say the $23/tonne carbon tax would cost the company?

Brickworks said the $23 per tonne carbon tax would cost the company about $12.8 million in earnings before interest and tax (EBIT).

Are brickmakers eligible for transitional compensation under the carbon-pricing scheme?

According to the article, heavy-polluting sectors like steel, cement and glass will receive significant transitional compensation because they are trade-exposed. Brickmakers will miss out on that compensation because the brick industry is not considered trade-exposed.

What actions are building-material companies considering to reduce the impact of the carbon tax?

Companies are looking at a mix of responses: Brickworks has closed old plants and invested in energy-efficient plants (claiming a 40% emissions reduction), CSR plans to pass on costs through product price rises, Adelaide Brighton is considering importing more materials, and Boral has mothballed some brick plants in Queensland.

Could the carbon tax make housing less affordable, and why?

Yes. Industry groups quoted in the article, including the Housing Industry Association, say higher input costs for bricks, cement and other materials will increase building costs. With new housing supply already below demand, higher construction costs could make new homes pricier and increase mortgage repayments for buyers.

How are some companies promoting alternatives to traditional building materials because of the carbon tax?

The article notes that as sustainability gains emphasis, firms like James Hardie and CSR are pushing fibre cement products to builders as a more energy-efficient alternative to some traditional materials.

Will companies pass the entire carbon-tax cost on to customers or try to absorb some of it?

Responses vary by company. Brickworks said it would try to fully recover the tax through price rises (up to 6%), while CSR also expects to increase prices across plasterboard, bricks, roof tiles and fibre cement. Others, like Adelaide Brighton, are weighing options such as increased imports to manage the impact, suggesting a mix of passing on costs and operational adjustments.