The implications of The New Tax System (TNTS) for the suite of price indexes (both producer and consumer) compiled and published by the Australian Bureau of Statistics (ABS) are wide-ranging. This Information Paper identifies and discusses the statistical issues and sets out ABS plans to deal with these matters. It should be read in conjunction with Information Paper: ABS Statistics and The New Tax System (cat. no. 1358.0) which was released on 26 April 2000 and which discusses issues arising from The New Tax System for ABS statistics more generally.
The New Tax System will result in changes in absolute and relative prices for goods and services. The extent to which these changes impact on ABS price indexes varies from index to index depending on the purpose of the index and hence the pricing basis adopted in their compilation.
The direct impact of The New Tax System on the producer price indexes is limited. A range of complex issues arise, however, in the case of the consumer price index. A summary of the major issues, on page v of the paper, is also provided below. The major issues are discussed in detail in the remainder of the paper.
The ABS will conduct seminar programs in all capital cities to provide opportunities for readers to learn more about the issues set out in this paper. Details are contained in the file seminar.pdf below. Queries or comments can also be addressed to the ABS contact officers listed on page 3 of the paper.
SUMMARY: KEY ISSUES FOR PRICE INDEXES ARISING FROM THE NEW TAX SYSTEM
- TNTS will have no direct impact on the producer price indexes, except for the Price Index of Materials Used in House Building and the Price Index of Materials Used in Building Other than House Building where removal of the wholesale sales tax will have some downward influence on some prices, and the Price Index of Materials Used in Coal Mining, where changes to the diesel rebate scheme are expected to have a downward influence on diesel prices.
- Indirect effects of TNTS are expected to have some downward influence on all producer price indexes.
CONSUMER PRICE INDEX
- TNTS will have a direct impact on the Consumer Price Index (CPI). The CPI will continue to measure final transaction prices inclusive of indirect taxes and hence will reflect the net effect of the tax changes included in TNTS.
- The ABS will introduce new weights into the consumer price index (CPI), based on the 1998-1999 household expenditure survey, for the September quarter 2000, thus introducing the 14th series CPI.
- A new utility-based commodity classification will be introduced with the 14th series CPI, to better address possible consumer substitution between commodities in response to relative price changes arising from TNTS.
- Subject to further evaluation, direct and indirect fees charged to consumers by financial institutions on deposit and loan facilities; fees charged by agents and other service providers in the transaction of real estate; and fees charged by brokers in the transaction of shares and other securities will be included in the 14th series CPI.
- Present thinking is that the household expenditure survey will next be conducted in respect of 2003-2004, with new weights being introduced into what will be the 15th series CPI from September quarter 2005.
- The ABS is unable to measure the full impact (covering first and subsequent round effects) of TNTS on the CPI.
- While there are significant qualifications attaching to such a measure, the ABS will compile an experimental constant tax rate measure, which will abstract from the direct or first round effects of changes in tax rates on the prices of consumer goods and services. This measure will be published in Australian Economic Indicators (ABS Cat. no. 1350.0) approximately one month after publication of the September quarter 2000 CPI.
AVERAGE RETAIL PRICES OF SELECTED ITEMS
- Average retail prices published from the September quarter 2000 will reflect the net effect of the tax changes included in TNTS.
HOUSE PRICE INDEXES
- From the September quarter 2000 these indexes will reflect the net effect of TNTS. The First Home Owners Scheme will not be taken into account in compiling these indexes, but will be taken into account in compiling the house purchase expenditure class in the CPI.