Tax price rises are in the past

The September quarter Con-sumer Price Index (CPI) results, released last week, show that there is no need for further general price rises due to the New Tax System alone.

The CPI indicates that the prices of consumer products that were expected to rise substantially because of the GST did rise. For example, clothing rose by between 7.5 to 10 per cent.

Equally, products that were expected to show price falls due to the tax changes generally fell. For example, household cleaning agents fell more than eight per cent and those expected to remain about the same generally did so, such as medical services.

Some businesses may have deferred passing on non-tax factors into prices around the time of the introduction of the tax changes. If this is the case, those businesses should be careful that future price increases are justified by these non-tax factors and that these are not implemented under the guise of the GST.

Also, the effects of the removal of WST embedded in costs through supply chains should contribute to some moderation in prices. Some businesses may have anticipated indirect tax savings in re-pricing, others should be passing these on as they occur.

The ACCC’s price-checking powers extend for more than another year. The ACCC will continue to investigate complaints. Active price checking, especially focusing on prices in industries where competition is weak, will also continue.

* Professor Allan Fels is chairman of the Australian Consumer and Competition Commission.

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