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 federal 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 details about the government's $1.2 billion support plan for the coal industry before it could offer its support.
"But we still need more clarity around transitional arrangements, such as those promised for the coal sector, before we can make a precise assessment of the long-term cost impact," 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, said the tax was "unfair", and warned 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.
"But it's early days, and it's a thin market. 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," Mr Morrow said.
Renewable energy companies were among the few winners as investors stepped away from the sharemarket and tried to digest the details of the long-awaited carbon tax announcement.
The geothermal energy explorer, Geodynamics, surged 22 per cent, Carnegie Wave Energy jumped 22 per cent, and Energy World, a gas and oil exploration company, rose 8 per cent. Infigen Energy rose 7 per cent.
But those rises 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.
Companies directly affected by the carbon tax took the biggest hits. BlueScope Steel slipped 6 per cent, OneSteel 5 per cent, and Alumina 3 per cent.
That was despite both BlueScope and OneSteel saying the proposal to include a specific plan for the steel industry as part of the carbon pricing scheme was sensible.
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.
Meanwhile economists said the policy was complicated and it would take time to work through the market.
"All told, the carbon tax proposals are very complicated and as a result the precise incidence and impact on the economy is difficult to assess with confidence," the chief economist of Nomura Australia, Stephen Roberts, said.
"Good reforms on the personal tax side are mixed with compensation changes on the business side that are likely to foster inefficiencies."
The fallout
How the sectors will fare under the carbon tax
Page 4
Green investment bank
Adele Ferguson - Page 5
Battle of climatic extremes
Ian Verrender - Page 6
Frequently Asked Questions about this Article…
How did the Australian sharemarket react to the federal government's carbon tax announcement?
The market took its first chance to pass judgment and moved lower — the carbon tax combined with overseas factors to push the market down, wiping more than 1.5% off the value of the S&P/ASX 200. Analysts called it a thin, weak market with little positive lead from the US.
Which sectors were worst affected by the carbon pricing plan?
Airlines, energy, coal and steel were among the poorest performers after the announcement. In fact every industry sector lost ground except telecommunications, and companies directly affected by the carbon tax suffered the biggest hits.
Which individual companies fell the most after the carbon tax news?
Some of the largest falls were in major mining and industrial names: BlueScope Steel slipped about 6%, OneSteel around 5% and Alumina roughly 3%. Overall declines among big miners contributed to the S&P/ASX 200 falls.
Were there any winners from the carbon tax announcement?
Yes — several renewable energy stocks rose as investors rotated away from parts of the sharemarket. Geodynamics jumped about 22%, Carnegie Wave Energy rose 22%, Energy World climbed 8% and Infigen Energy gained about 7%, though those gains were small compared with declines in major mining stocks.
How did BHP Billiton and Rio Tinto respond to the carbon tax proposal?
BHP Billiton said it needed more clarity on transitional arrangements and details of the government's $1.2 billion coal support package before it could offer support. Rio Tinto said it was "disappointed," calling the plan unfair and warning it could hinder investment and jobs growth without reducing global emissions.
What did economists say about the likely economic impact of the carbon tax?
Economists described the policy as complicated and said it will take time for markets to work through the details. Nomura Australia's chief economist, Stephen Roberts, warned the precise incidence and economic impact are difficult to assess with confidence and suggested some business-side compensation changes could foster inefficiencies.
How might the steel industry be affected and respond under a carbon pricing scheme?
Steel companies were hit hard but acknowledged some aspects of the proposal. BlueScope and OneSteel said including a specific plan for the steel industry was sensible. OneSteel indicated it would try to reduce its use of coking coal in steelmaking, though the sector is technologically constrained in how quickly it can cut emissions.
What should everyday investors watch for after the carbon tax announcement?
Investors should follow the detailed transitional arrangements and government support measures (for example the $1.2 billion coal package), monitor sector performance — especially mining, coal, steel and renewable energy stocks — and keep an eye on global market leads, because foreign factors and thin market conditions have amplified the reaction.
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