Peak retail industry body, the Australian Retailers Association (ARA) is claiming that the recent carbon tax announcement spells disaster for the retail sector, with planned tax cuts failing to adequately compensate retailers for consumers’ tightened purse strings.

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 worsen because of the carbon tax.

The details of the carbon tax, which will commence in July 2012, were explained by the federal government yesterday. It will start at $23 a tonne, rising by 2.5 percent a year and will be paid by approximately 500 of our biggest polluters. The costs for the average household will rise by $9.90 a week. There will, however, be two rounds of tax cuts and increases in allowances, payments and benefits.

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, said Zimmerman.

There are too many households that will miss out on any compensation at all as a result of an estimated $9.90 increase per week in the cost of living. Tax cuts averaging $10.10 per week for only 40 percent of households leave little margin for error and don’t go far enough.

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