The Impact of the GST on Mortgage Pricing of Australian Credit Unions: An Empirical Analysis (Excerpt)

Accounting Research Journal, Vol 27(1), 2014, pp 37 - 51

3 Pages Posted: 18 Sep 2014

See all articles by Benjamin Liu

Benjamin Liu

Griffith University - Department of Accounting, Finance and Economics

Allen Huang

Griffith University - Department of Accounting, Finance and Economics

Brett Freudenberg

Griffith University - Griffith Business School; Griffith University - Griffith Law School

Date Written: September 16, 2014

Abstract

Purpose – The purpose of this paper is to investigate the impact of the Goods and Services Tax (GST) on mortgage pricing and to measure the GST shifting ratio of Australian credit unions.

Design/methodology/approach – Using the proprietary data from 79 credit unions in Australia, we perform multivariate regression analysis on the effect of the GST on mortgage effective yield spreads and interest margins, respectively. We also introduce a model that is used to measure the GST shifting ratio.

Findings – We document that the introduction of the GST in July 2000 led to the substantial rise in mortgage costs charged by credit unions in the post-GST periods. Overall, the GST alone contributed to the increase of effective yield spreads and interest margin by 65.3 and 70.1 basis points, respectively. As measured by the GST-shifting ratio, credit unions passed more than twice of the GST rate. This suggests GST over-shifting, and it is generally consistent with tax over-shifting literature.

Originality/value – This is the first time the GST shifting ratio has been robustly measured with the use of multivariate models on mortgage costs.

Keywords: Credit unions, GST shifting, Mortgage pricing

JEL Classification: E51, E52, H22, H23, K34

Suggested Citation

Liu, Benjamin and Huang, Allen R. and Freudenberg, Brett, The Impact of the GST on Mortgage Pricing of Australian Credit Unions: An Empirical Analysis (Excerpt) (September 16, 2014). Accounting Research Journal, Vol 27(1), 2014, pp 37 - 51, Available at SSRN: https://ssrn.com/abstract=2497269

Benjamin Liu (Contact Author)

Griffith University - Department of Accounting, Finance and Economics ( email )

PMB 50
Gold Coast Queensland 9726
Australia

Allen R. Huang

Griffith University - Department of Accounting, Finance and Economics ( email )

PMB 50
Gold Coast Queensland 9726
Australia

Brett Freudenberg

Griffith University - Griffith Business School ( email )

Brisbane, Queensland 4111
Australia

Griffith University - Griffith Law School ( email )

Nathan Campus, GU
Nathan 4111
Australia

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