AUSTRALIAN companies have promised higher prices and warned of stunted growth in parts of the economy, as the market took its first opportunity to pass judgment on the Gillard government's carbon tax plans.
As the carbon tax combined with foreign factors to drive the market down, the nation's two biggest companies gave the plan a cool response yesterday.
BHP Billiton, the company widely credited with reviving the domestic debate on a carbon price last year, said it required more detail about the Government's $1.2 billion support plan for the coal industry before it could offer its support.
"We still need more clarity around transitional arrangements, such as those promised for the coal sector, before we can make a precise assessment," the company said in a statement.
That response was calm compared to the roasting delivered by Rio Tinto, which said it was "disappointed" by a carbon plan that would "hinder investment and jobs growth without reducing global carbon emissions".
Rio Tinto's Australian managing director David Peever labelled the tax "unfair", and warned that it had failed to shield the export sector.
Richard Morrow, the director of EL&C Baillieu Stockbroking, said the carbon tax appeared to be poorly received.
"The region was weak, the lead from the US market was weak, so really there wasn't a lot of positives for the market to cling on to."
Renewable energy companies were among the few winners as investors stepped away from the sharemarket and they tried to digest the details of the long-awaited carbon tax announcement.
Geothermal energy explorer, Geodynamics, surged 22 per cent. Carnegie Wave Energy jumped 22 per cent. Energy World, a gas and oil exploration company, was up 8 per cent. Infigen Energy was up 7 per cent. But those roses were small compared with the falls of major mining companies, and more than 1.5 per cent of the value of the S&P/ASX 200 index was wiped off in the process.
Airlines, energy, coal and steel companies were among the poorest performers.
Every industry sector lost ground, with the exception of telecommunications.
BlueScope Steel led the decline, ending the day down 6.67 per cent at $1.26. Qantas closed down 3.25 per cent at $1.935. OneSteel fell 5 per cent, and Alumina 3 per cent.
OneSteel said it would seek to reduce its use of coking coal in steel manufacturing, but the sector was technologically constrained in its ability to reduce carbon emissions.
Economists said the policy would take time to work through the market.
"The precise incidence and impact on the economy is difficult to assess with confidence," said the chief economist of Nomura Australia, Stephen Roberts.
Frequently Asked Questions about this Article…
How did the Gillard government's carbon tax announcement affect major mining companies like BHP Billiton and Rio Tinto?
Major miners reacted cautiously or negatively to the carbon tax. BHP Billiton said it needed more detail on the Government's $1.2 billion support plan for the coal industry and clarity on transitional arrangements before it could offer support. Rio Tinto said it was “disappointed,” arguing the plan could hinder investment and jobs growth without reducing global emissions and calling the tax “unfair.”
Which Australian sectors and stocks benefited from the carbon tax announcement?
Renewable energy stocks were among the few winners as investors digested the carbon tax details. Geodynamics jumped about 22%, Carnegie Wave Energy rose about 22%, Energy World was up around 8%, and Infigen Energy gained about 7%. The article also notes that telecommunications was the only industry sector that did not lose ground that day.
Which companies and sectors were hit hardest on the ASX after the carbon tax news?
Airlines, energy, coal and steel companies were among the weakest performers. BlueScope Steel led declines, dropping about 6.67% to $1.26; Qantas fell about 3.25% to $1.935; OneSteel dropped about 5%; and Alumina fell about 3%. Overall, more than 1.5% of the S&P/ASX 200 index value was wiped off that session.
What did OneSteel say about reducing its use of coking coal and cutting carbon emissions?
OneSteel said it would seek to reduce its use of coking coal in steel manufacturing, but acknowledged the sector is technologically constrained in its ability to reduce carbon emissions.
How did investors and stockbrokers interpret the immediate market reaction to the carbon tax?
Market observers said the carbon tax appeared to be poorly received. Richard Morrow of EL&C Baillieu Stockbroking noted the region was weak and US market leads were weak, so there weren't many positives for the market to cling to. Investors stepped away from the broader sharemarket while trying to digest the long‑awaited announcement.
What did economists say about the longer-term economic impact of the carbon tax?
Economists warned the policy would take time to work through the market. Stephen Roberts, chief economist at Nomura Australia, said the precise incidence and impact on the economy is difficult to assess with confidence, indicating uncertainty about short‑term and long‑term effects.
How large was the market impact on the S&P/ASX 200 index after the carbon tax announcement?
The article reports that more than 1.5% of the value of the S&P/ASX 200 index was wiped off in the market reaction to the carbon tax announcement.
Why did renewable energy companies rally while major mining and resources stocks fell on the day?
Renewable energy companies were seen as potential beneficiaries of a carbon pricing policy, so investors moved into those names as they tried to digest the tax details. By contrast, major mining and resources stocks fell amid concerns about higher costs, potential constraints on investment and jobs, and uncertainty over transitional arrangements and export protections.
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