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GST inflation spike could hit Telstra's charges too and the Howard Government would profit.



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GST Inflation Spike Could Hit Telstra's Charges Too And The Howard Government Would Profit Stephen Smith - Shadow Minister for Communications

Media Statement - 28 January 2001

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Shadow Minister for Communications, Stephen Smith, said today that the Howard Government's GST inflation spike would allow Telstra to further increase its charges above those announced last week.

"Petrol is not the only item that will see a GST induced inflation spike," Mr Smith said.

"The current price control arrangements, that restrict the ability of Telstra to raise its prices, are linked to the Consumer Price Index.

"Because of the GST, the CPI increased by 3.7 percent in the September 2000 quarter alone.

"This would allow Telstra to increase its prices even further than it did last week for items such as the standard basket of local call and line rental services and for connection services.

"While Telstra would be the initial beneficiary of these price rises, the Howard Government would benefit too.

"If Telstra achieves the $100 million in increased revenue that market analysts predict will flow from the changes to local call and line rental charges announced last week, the Howard Government would receive about $58 million of that sum in increased tax and dividend payments.

"The Howard Government's increased revenue take would consist of approximately:

$9 million in increased GST payments; ● $31 million in increased company tax payments; and ● $18 million in increased dividend payments. ●

"And the Howard Government will receive approximately an extra 58 cents out of every extra dollar that Telstra earns by increasing its prices in the future.

"No wonder Senator Alston welcomed Telstra's price rises last week," Mr Smith concluded.

Authorised by Geoff Walsh, 19 National Circuit, Barton ACT 2600.