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Tuesday, 19 August 1980
Page: 413


Mr Willis asked the Treasurer, upon notice, on 31 March 1980:

(   1 ) Did his statement of 6 March 1980 on the economy indicate that the estimated inflation rate of 9.5 per cent for the March quarter 1980 would be discounted for tax indexation purposes by 2.3 per cent for the effects of Government policy (Hansard, page 743).

(2)   What was the estimated proportion of the annual increase in the Consumer Price Index that can be directly attributed to the effects of Government policy in (a) 1976-77, (b) 1977-78, (c) 1978-79 and (d) 1979-80.


Mr Howard - The answer to the honourable member's question is as follows:

(1)   1 indicated that it might be assumed, for illustrative purposes, that the CPI for the four quarters ending March 1980 would be about 9.5 per cent above the level of the previous year and, on the same basis, that discounting for the effects of Government decisions would produce a full indexation factor for 1980-81 of 7.2 per cent. In the event, the increase in the Consumer Price Index for the four quarters ending March 1980 was 9.7 per cent which, after discounting for the effects of Government decisions, has resulted in a full tax indexation factor for 1980-81 of 7.5 per cent. As the Government's decision was to apply 50 per cent indexation to the personal taxation scale from 1 July 1980, the increase for indexation purposes will be 3.8 per cent.

(2)   The adjustments made to the Consumer Price Index for the purpose of calculating full tax indexation factors in recent years are indicated in the following table:

Tax indexation

(a)   Increase in four quarters ending March of the specified year over four quarters ending preceding March e.g. for 1976-77, the CPI for the four quarters ended March 1977 was 13.6 per cent higher than that for the four quarters ended March 1976.

(b)   In deriving the income brackets for the 1978-79 rate scale the standard rate scale introduced from 1 February 1 978 was subject to half-indexation: rebates were subject to full indexation.

(c)   Indexation was suspended in 1979-80.

(d)   Half indexation is to apply in 1980-81 to the tax scale while rebates are to rise by 34 per cent.







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