The Government/Democrats' package of changes in indirect taxes

Australia is faced with a comprehensive package of changes to its indirect tax system, including the introduction of a GST. The Government's only quantitative analysis in formulating the package employed PRISMOD, an archaic input-output price model. PRISMOD sheds dim light on a very limited range of policy-relevant variables. This article explains how PRISMOD works; this is of continuing relevance because PRISMOD results are a benchmark in negotiations concerning the price effects of the tax package. Then an assessment of the package is made using MONASH, a comprehensive dynamic general equilibrium model. Overall, the conclusions are negative: the package is welfare-reducing and unnecessary.