Goods and Services Tax and Mortgage Costs of Australian Credit Unions

Abstract

Since Australia implemented a new tax system of Goods and Services Tax (GST) in July 2000, research attempted to examine the impact of the GST on general price levels, but a little effort has been directed at investigating the impact of the GST on mortgage costs. Using proprietary data of 79 credit unions in Australia over 36 months with 2805 observations, this paper examines the effect of taxation incidence on mortgage yield spreads of credit unions in the pre- and post-GST periods. We find that the mutual lenders significantly increased their mortgage charges in the post-GST period.