Food demand elasticities for Australia

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.