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

Article

Valadkhani, Abbas and Layton, Allan P.. 2004. "Quantifying the Effect of the GST on Inflation in Australia's Capital Cities: An Intervention Analysis ." The Australian Economic Review. 37 (2), pp. 125-138. https://doi.org/10.1111/j.1467-8462.2004.00314.x
Article Title

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

ERA Journal ID18190
Article CategoryArticle
AuthorsValadkhani, Abbas (Author) and Layton, Allan P. (Author)
Journal TitleThe Australian Economic Review
Journal Citation37 (2), pp. 125-138
Number of Pages14
Year2004
Place of PublicationAustralia
ISSN0004-9018
1467-8462
Digital Object Identifier (DOI)https://doi.org/10.1111/j.1467-8462.2004.00314.x
Web Address (URL)http://www.blackwell-synergy.com/action/showPdf?submitPDF=Full+Text+PDF+%28140+KB%29&doi=10.1111%2Fj.1467-8462.2004.00314.x
Abstract

This article examines the magnitude and duration of the effect of the Goods and Services Tax(GST) on inflation in Australia's eight capital cities using the Box and Tiao intervention analysis and quarterly data spanning from
1948:4 to 2003:l. We found that the 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, and the figure for Hobart was 3.3 per cent (maximum effect). Based on Wald test results, we also found some evidence that there is no significant (or substantial) difference in the average price changes among capital cities. We could not reject the null hypothesis that the GST increased the consumer price index by 2.8 per cent across the board in various cities. These results are also consistent with previous studies and surveys.

KeywordsGood and Services Tax; GST; price increases; inflation; intervention analysis
ANZSRC Field of Research 2020380115. Public economics - taxation and revenue
380202. Econometric and statistical methods
380205. Time-series analysis
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Byline AffiliationsQueensland University of Technology
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