The Australian Competition and Consumer Commission does not see a need for further general price rises due to the New Tax System alone, Acting ACCC Chairman, Mr Allan Asher, said today when commenting on the results of the September quarter Consumer Price Index.
"The ACCC's price guidelines and checking have limited price rises to those justified by actual cost increases. Yesterday's CPI figure was consistent with the results of the ACCC's retail price checking issued last week".
ACCC price checking shows that product prices that were likely to change substantially, either up or down, due to the tax changes generally had changed by August. In the ACCC's August survey 92 per cent of prices expected to increase by five per cent or more from 1 July had changed.
"The CPI indicates that the prices of consumer products that were expected to rise substantially because of the GST did rise – for example clothing up between 7.5 to 10 per cent, restaurant meals up nine per cent, electricity and house repairs and maintenance up about 10 per cent. Equally, products that were expected to show price falls due to the tax changes generally fell – for example household cleaning agents down more than eight per cent, tools and motor vehicle parts down nearly four per cent; and products that were expected to remain about the same generally did so – for example education fees, rents and medical services.
"The ACCC Guidelines were well publicised. They allowed businesses to pass on the GST and required them to pass on cuts in Wholesale Sales Tax. Prices could increase as long as they did not increase by more than the net dollar effect of the tax changes. If prices increased by less than permitted, or fell by more than required, this was due to the pressures of competition and consumer vigilance. There is no reason to expect competition to change fundamentally in these markets over the next few quarters.
"Some businesses may have separated tax and non-tax factors in pricing and 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 September quarter CPI results were broadly consistent with ACCC expectations of price movements as published in the Everyday Shopping Guide issued to all households in May and June last year.
"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.
"Further New Tax System changes to be introduced on 1 July 2001, include the phasing in of input tax credits for business on new car purchases, the abolition of Financial Institutions Duty and the abolition of stamp duty on marketable securities will further reduce business costs and benefit consumers," Mr Asher said.