Food demand elasticities for Australia

Abstract

There is renewed interest in robust estimates of food demand elasticities at a disaggregated level not only to analyse the impact of changing food preferences on the agricultural sector, but also to establish the likely impact of pricing incentives on households. Using data drawn from two national Household Expenditure Surveys covering the periods 1998/1999 and 2003/2004, and adopting an Almost Ideal Demand System approach that addresses the zero observations problem, this paper estimates a food demand system for 15 food categories for Australia. The categories cover the standard food items that Australian households demand routinely. Own‐price, cross‐price and expenditure elasticity estimates of the Marshallian and Hicksian types have been derived for all categories. The parameter estimates obtained in this study represent the first integrated set of food demand elasticities based on a highly disaggregated food demand system for Australia, and all accord with economic intuition.

GST Reform in Australia: Implications of Estimating Price Elasticities of Demand for Food

“…Andreyeva et al (2010) report US price elasticity estimates from 160 studies over the period 1938-2007 by food category, which show that most elasticities are between 0 and À1 and confirm that certain food categories (such as soft drinks, meat, fruits and vegetables) are quite elastic, while others (such as fats/oils, sweets/sugars and eggs) are quite inelastic. Ulubasoglu et al (2015) provide an overview of previous food demand estimates and present estimates based on HES data. Our estimates are also broadly consistent with evidence for Australia.…”

“…For example, Cameron and Creedy (1995) use simulation techniques to compare the life-cycle implications of a revenue-neutral partial shift towards a consumption tax and find that exemptions cannot compensate for the simultaneous change in income tax. Recent Australian studies have estimated price elasticities of demand for food (Ulubasoglu et al, 2015), studied the effects of taxing sugar-sweetened beverages across different income groups (Sharma et al, 2014), and projected tax revenues resulting from alternative GST reform scenarios (Phillips & Taylor, 2015). Freebairn (1997) suggests a broad based consumption tax for general revenue raising, coupled with taxes to address externalities, and recognises that changing the tax mix may generate politically contentious redistributive effects.…”

“…Freebairn (1997) suggests a broad based consumption tax for general revenue raising, coupled with taxes to address externalities, and recognises that changing the tax mix may generate politically contentious redistributive effects. Recent Australian studies have estimated price elasticities of demand for food (Ulubasoglu et al, 2015), studied the effects of taxing sugar-sweetened beverages across different income groups (Sharma et al, 2014), and projected tax revenues resulting from alternative GST reform scenarios (Phillips & Taylor, 2015). Unfortunately, we still know relatively little about the potential responses of consumers that would result from a reform of the GST on food and the implications for low-income households.…”

The economic feasibility of price discounts to improve diet in Australian Aboriginal remote communities

“…Food items were categorised according to the 1995 National Nutrition Survey (NNS) 24 and mapped to the food groups within the reported price elasticity tables of Ulubasoglu et al (2010). 25 Beverage data (in dollars and litres) were mapped to the published beverage categories of Smith et al (2010).…”

“…There are no published food price elasticity data for Australian Aboriginal and Torres Strait Islander populations. An Australian study by Ulubasoglu et al 25 and an American study by Smith et al 26 were used because the time periods -1998 to 2007 and 1998/9 to 2003/04, respectively -were sufficiently similar, and Smith et al captured the targeted beverages while Ulubasoglu et al covered the targeted foods.…”