BCA Welcomes CPI Outcome

25 October 2000

Mr David Buckingham, Executive Director of the Business Council of Australia, welcomed today’s CPI outcome saying that containing this quarter’s price increase to 3.7 per cent was a very good outcome for the economy.

Mr Buckingham said “Australia has digested the price effects of the introduction of the GST better than expected. One of the assumptions behind this year’s Budget was that the price rise this quarter would be about 4.5 percent, so we have come in well below the expected level.”

Mr Buckingham continued that “this quarterly result suggests there is little significant flow through to longer term inflation. In fact, budget expectations were that the impact of the GST this quarter by itself would be about 3.75 per cent so that the underlying inflation rate must have been very low. Such a low outcome means that taxpayers who were compensated by income tax reductions have no reason to claim additional compensation. Indeed the wage case now foreshadowed by the ACTU simply does not exist.”

Mr Buckingham commented that “The low inflation outcome reflects the increasing competitiveness of the economy. People had feared that firms would raise prices as part of the change in the tax system but the extent of competition has worked its own effect”.

Mr Buckingham concluded: “The benefits of the pro-competitive reforms over the last decade, and pressures from international competitors, have clearly made the economy more efficient.



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