Beazley Accuses Pm Of 'hidden' Gst On Food
The Age
Friday September 18, 1998
BURNIE
Labor yesterday stepped up its fear campaign on the impact of the proposed GST on families, with a claim by the Opposition Leader, Mr Kim Beazley, that the Prime Minister had deliberately misled Australians about the real price rises the tax would add to food.
While campaigning in Tasmania, Mr Beazley said the real ``hidden" Consumer Price Index rise associated with a GST would be 5per cent - not the 1.9per cent claimed in the Government's tax package forecasts.
Mr Beazley cited as evidence the comments made by Dr Colin Hargreaves, executive director of the Economic Modelling Bureau of Australia, and Dr Neil Warren of the University of New South Wales.
Dr Hargreaves said it was unrealistic to assume that lower costs arising from the coalition's tax proposals - especially the abolition of the wholesale sales tax - would be passed on in full from producers to consumers.
``If one assumes no preconceptions about the percentage pass-through, and therefore uses a uniform prior distribution ... an average estimate of 50per cent pass-through would lead to a CPI effect of 5.95per cent, i.e. three times the estimate in the tax plan document," Dr Hargreaves wrote.
His comments, based on Treasury's economic modelling system and released by the Labor Party yesterday, come after Dr Warren - a former consultant to the Liberal Party - questioned the methodology behind the Government's tax package.
Dr Hargreaves told The Age his comments were originally made to an economic modelling seminar in early September, and he was unaware that Labor had distributed his paper yesterday. He said Treasury's modelling depended critically on the assumption that business would pass on to customers 100per cent of the benefit from the abolition of sales tax, state taxes on business and reduced diesel fuel taxes.
Dr Hargreaves said Treasury's modelling assumed the GST would generate no increase in either employment or exports.
Mr Beazley said that based on the comments of Dr Warren and Dr Hargreaves, it was now ``quite evident" that mid-way through the election campaign the Government has ``seriously misled" Australians on the real effect of the GST on food.
Mr Beazley said the GST would raise the cost of a shopping trolley filled with household goods, for the average family, from $93 a week to more than $100 - more than double the Government's projected 1.9per cent rise.
© 1998 The Age
