Monday, July 22, 2024

Essential manufacturers need energy price relief, says AFGC

The Australian Food and Grocery Council (AFGC) is urging the federal and state governments to act on soaring energy prices and reduce pressure on food and grocery manufacturers facing energy cost rises of up to 300%.

Businesses that make essential food and grocery items for Australia and export markets are facing enormous increases in gas and electricity prices, adding to the burden of rising input costs driven by Covid-19 impacts, flooding and the war in Ukraine.

The AFGC, the peak body for Australia’s $134 billion food and grocery manufacturing industry, supports measures to reduce electricity and gas costs for consumers and businesses.

AFGC CEO Tanya Barden says it is time for action to cap soaring gas prices which are threatening the viability of many businesses.

“The vast majority of food and grocery manufacturers purchase gas on the retail market rather than the wholesale market and so consideration must be given to making the code of conduct governing gas supply agreements mandatory and extending it, along with price caps, to cover retail pricing,” Ms Barden said.

“While wholesale price caps are important, manufacturers are exposed to retail pricing and they are incurring huge increases in the cost of gas that undermine the long-term future of Australia’s largest manufacturing industry.

“With the state, territory and federal governments coming together this week, this is the time for meaningful action on energy prices.

“Australians understand that acting to rein in soaring energy costs isn’t just about supporting consumers now, it’s about backing local manufacturing capabilities that will secure our nation’s future,” she said.

Michael Perich is CEO of major Australian food and beverage processor Noumi, which employs almost 600 people at facilities in regional Victoria and south-western Sydney and makes popular brands including Milklab and Australia’s Own.

“We are currently facing an unprecedented and unsustainable four-fold increase in our contracted gas prices,” Mr Perich said. “It’s no exaggeration to describe this as a national energy crisis.”

Mr Perich said intervention is needed to avoid passing even more costs on to consumers and to stay competitive in Asian markets, where energy prices have not risen as sharply.

“The energy crisis is making Australian food processors uncompetitive in international markets,” he said.

Steve Nicholson is director and acting CEO, ANZ, of The Sorbent Paper Company, which makes Sorbent toilet paper at a factory employing 150 people in Melbourne.

“The Sorbent range of tissue products are all manufactured locally and we are very concerned about the impact of energy costs,” Mr Nicholson said.

“Our gas costs will increase by 300 per cent in 2023 and with forecast electricity costs looking to increase by similar amount in 2024, this will place an enormous cost strain for commercially viable local production.”

Ms Barden said food and grocery manufacturing is Australia’s biggest manufacturing sector and a significant contributor to the national economy and regional employment.

“These businesses have sustained Australia and kept supermarket shelves full throughout the disruption and cost increases resulting from the Covid-19 pandemic, natural disasters and the war in Ukraine.

“We know from the federal budget that gas prices are forecast to continue rising by 20 per cent a year over the next two years and for businesses already under immense pressure, such increases are unsustainable,” she said.

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