15 January 2000

Hockey directs ACCC on GST

The Minister for Financial Services Joe Hockey today directed the ACCC not to approve any business initiatives on the GST that may increase prices by more than 10%.

"No prices will increase by more than 10% as a result of the GST.- that is our policy and that is the law.

"Any rounding that increases prices beyond the GST of 10% is unacceptable. And companies that try to profit from the introduction of the GST will face fines of up to $10 million.

Mr Hockey was responding to reported approvals by the ACCC of a Qantas Frequent Flyer price increase from $20 to $22 as a result of "approved" rounding.

The ACCC have informed me that they have had discussions with Qantas but no agreement was reached.

It was also suggested that rounding beyond a 10% price increase was acceptable provided that a company made no additional profit and rounding down occurred for similar products. This would deliver an "average" price movement for a particular product.

"This will create confusion and uncertainty for consumers and is not in line with our policy that no price will increase by more than 10% as a result of the GST."

"I have asked the ACCC to meet with Qantas and fix the matter so there will be no membership fee increase of more than 10% for Frequent Flyers.

Mr Hockey reaffirmed that if prices increase, as a result of the GST, it must be by 10% or less and many prices will come down as wholesale sales tax and other taxes are abolished on 1 July.

"Moreover $12 billion of income tax cuts means consumers will be better off with the new tax system.

Consumers come first and the ACCCÂ’s direction is clear.