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Quantifying the Effect of GST on Inflation in Australia’s Capital Cities: An Intervention Analysis

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  • Abbas Valadkhani
  • Allan P. Layton

Abstract

This paper examines the magnitude and duration of the GST effect on inflation in Australia’s eight major capital cities using the Box and Tiao intervention analysis and quarterly data spanning from 1948:4 to 2003:1. We found that GST had a significant but transitory impact on inflation only in the September quarter of 2000 when this new tax system was implemented. In this quarter inflation showed an additional increase of 2.6 per cent in Sydney (minimum effect) and 2.8 per cent in Australia as a whole, the same figure for Hobart was 3.3 per cent (maximum effect). Based on the Wald test results, we have also found some evidence that there is no significant (or substantial) difference in the average price changes among major capital cities. We could not reject the null hypothesis that GST increased the CPI by 2.8 per cent across the board in various cities. These results are also consistent with previous studies/surveys.

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File URL: http://external-apps.qut.edu.au/business/documents/discussionPapers/2003/DP%20153%20Valadkhani%20&%20Layton.pdf
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Bibliographic Info

Paper provided by School of Economics and Finance, Queensland University of Technology in its series School of Economics and Finance Discussion Papers and Working Papers Series with number 153.

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Date of creation: 20 Sep 2003
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Handle: RePEc:qut:dpaper:153

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Postal: GPO Box 2434, BRISBANE QLD 4001
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Web page: http://www.bus.qut.edu.au/faculty/economics/
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Related research

Keywords: Intervention Analysis; State and Local Taxation; Australia.;

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  1. Enders, Walter & Sandler, Todd & Parise, Gerald F, 1992. "An Econometric Analysis of the Impact of Terrorism on Tourism," Kyklos, Wiley Blackwell, vol. 45(4), pages 531-54.
  2. Kwiatkowski, D. & Phillips, P.C.B. & Schmidt, P., 1990. "Testing the Null Hypothesis of Stationarity Against the Alternative of Unit Root : How Sure are we that Economic Time Series have a Unit Root?," Papers 8905, Michigan State - Econometrics and Economic Theory.
  3. Lloyd, Tim & Morrissey, Oliver & Reed, Geoffrey, 1998. "Estimating the Impact of Anti-dumping and Anti-cartel Actions Using Intervention Analysis," Economic Journal, Royal Economic Society, vol. 108(447), pages 458-76, March.
  4. Charles W. Bausell Jr., Frank W. Rusco and W. David Walls, 2001. "Lifting the Alaskan Oil Export Ban: An Intervention Analysis," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 81-94.
  5. Thompson, Patrick A & Noordewier, Thomas, 1992. "Estimating the Effects of Consumer Incentive Programs on Domestic Automobile Sales," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(4), pages 409-17, October.
  6. Peter Dawkins & David Johnson, 1998. "The Interaction of Tax and Social Security: Introduction and Overview," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 31(3), pages 258-262.
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Cited by:
  1. Allen Huang & Benjamin Liu, 2013. "The GST and mortgage costs: Australian evidence," Discussion Papers in Finance finance:201302, Griffith University, Department of Accounting, Finance and Economics.
  2. Valadkhani, Abbas, 2005. "Pre- and Post-Dynamic GST Effects on Goods and Services Included in the CPI Basket," Economics Working Papers wp05-08, School of Economics, University of Wollongong, NSW, Australia.

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