Carbon tax price lift not on GST scale

19 Oct 2012, 2:17 pm   -   Source: AAP

The carbon tax is expected to have lifted prices but about one-quarter of the effect of the GST following its introduction in 2000.

The carbon tax is expected to have lifted consumer prices by around half a per cent during its first three months of operation.

Economists say the greatest impact has been on electricity prices, though the tax is also believed to have lifted gas prices, council rates and fruit and vegetables.

Still, the carbon tax's effect is expected to be less than a quarter of the spike in prices after the introduction of the GST in 2000.

The Australian Bureau of Statistics will release the Consumer Price Index (CPI) measure of inflation for the three months to September, on October 24.

AAP's survey of 15 economists on Friday revealed a median forecast for the CPI to have risen by 1.1 per cent during the September quarter.

Bank of America Merrill Lynch Australia chief economist Saul Eslake said the carbon tax was expected to have lifted the inflation rate 0.7 per cent during the 2012/13 financial year, with about 0.5 or 0.6 per cent of that believed to have occurred in the September quarter.

He said that by comparison the introduction of the GST lifted prices by about 2.9 per cent (contributing to a 3.7 per cent rise in CPI) during the three months to September 2000.

"Compared to the impact of the GST 12 years ago, it (the impact of the carbon tax) is quite small," he said.

"So to describe it as (in the words of federal Opposition Leader Tony Abbott) `a great big wrecking ball to the economy' is just hyperbole," he said.

The GST was introduced by the Howard government on July 1 2000 and brought in more than $26 billion (in 2000 dollars) in its first year of operations, or about 3.4 per cent of the value of the national economy at the time.

By contrast, Treasury expects the carbon tax, introduced at the start of this financial year, to bring in $7.69 billion in its first 12 months, or about 0.5 per cent of the current value of the economy.

AMP chief economist Dr Shane Oliver said that while the GST covered most consumer goods, the carbon tax affected relatively few items.

He said the GST had been introduced at a time of strong consumer confidence and high inflation, a sharp contrast to the present environment.

"The key is, I think, the carbon tax was introduced at a time of consumer price resistance in Australia, where retailers were having discounts," he said.

"So it is of no surprise that the impact of the carbon tax is certainly a lot less than might have been expected."

Westpac economist Justin Smirk said he expected the carbon tax to have lifted the CPI by 0.4 per cent during the September quarter, with half of that impact coming from higher electricity prices.

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