David Naulls

Businesses are taking varying approaches to how much of the GST increase, if any, they absorb and how much they pass on.

For sure, it’s more complex this time than when GST rose from 10 to 12.5 percent. Computerisation over the last 20 years has allowed companies to differentiate their pricing in increasingly fine-grained ways. There are also new types of services available now that didn’t exist then – such as the myriad of mobile phone and ISP plans.

We have more subscription rates ourselves than we had back then and like many businesses we now sell over the internet.

Unfortunately, it’s not just a case of telling the computer to increase prices by 2.22 percent because this results in prices going over certain psychological price points such as $19.99 or creates prices that aren’t convenient whole numbers. So most businesses will be doing some form of “unders” and “overs”, where some prices are set below the increase in the GST rate and some are slightly over.

Preliminary discussions we have had with some major companies suggest that the GST increase won’t be uniform across all their products or services – they will load more on to some products than others.

The new pricing will take some time to settle down and we will all have to be patient while it does. But what we don’t want to see is companies taking the opportunity of the GST increase to smuggle in an extra price increase.

We’ve had some unconfirmed reports of projected price increases way above the rate of inflation. Companies should have put through planned price increases before 1 October came round rather than wrapping it up in a tax increase that’s payable on all goods and services.

We intend to monitor prices increases and publish what we consider the more unreasonable ones. We encourage our members and readers to send to us flagrant examples of over pricing under the guise of a GST increase.

David Naulls
Editor
Consumer magazine

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