NIEIR : Strategic Economic Consulting : Reports and Models

Economic modelling

National Economics has provided economic consulting services to industry and government for twenty years and has produced many hundreds of reports and forecasts for its clients. This extraordinary productivity has meant that National Economics has built a considerable body of intellectual capital in terms of the expertise of its staff, the data sets, models and results of econometric analyses.

A major part of this capital is the Institute's IMP modelling suite, a range of powerful forecasting and analysis tools which give National Economics "leading edge" capability in national, state, regional and local area economic and business analysis.

Other formal models include:

general forecasting models;
micro-simulation models for assessing business and household level economic activity and the distributional consequences of policy changes;
detailed industry modelling with forecasting sectors (130 industry sectors including road freight);
international and trade models;
economic activity "leading indicator" models;
integrated regional models and forecasting covering all regions of Australia down to the Statistical Local Area level; and
detailed household behavioural modelling covering 400 consumer expenditure categories linked to over 50 socio-demographic variables down to Censor Collector District (CCD or groups of 200 to 300 households) level.

Purpose built models are developed for specific consulting projects including occupational demand, privatisation, regional development, policy and strategy analysis, infrastructure planning, market research, cost-benefit analysis and the impact of major infrastructure projects and community events.

National Economics has an extensive suite of regional econometric models that are used to generate projections for employment and occupations down to the Statistical Local Area (SLA) level. The standard projections are by:

four-digit ANZSIC industry; and
four-digit ASCO occupational categories.

These standard occupational categories can be recast in six-digit ASCO projections.

Regional Modelling

Public and private sector managers need to know more about the dimensions of national growth and its regional pattern. National Economics' forecasts provide estimates of how much growth and when it will occur, while the regional modelling details where this growth will occur.

Australia is a relatively small component of the international economy. At the national level Australia's economic growth is closely linked to growth in the world economy. National Economics' models make the links between international, national and regional trends.

Projections of population growth, economic growth and local expenditure can be developed for regions within all parts of Australia, thus providing business and government with a powerful planning tool.

Using Regional Modelling

The regional models can be used to evaluate likely growth within regions and also the potential impact of infrastructure and business investment upon a region.

National Economics' regional models are used to:

evaluate the impact of proposed investments, particularly as part of Environmental Impact Studies;
to evaluate where market growth will be concentrated, thus providing a picture of where to locate infrastructure and/or retail facilities;
to evaluate the market potential of existing facilities; and
to assist in the valuation of regional business activities.

In the public sector the regional modelling has been used to:

evaluate the impact of regional infrastructure development programs;
assist in development of regional planning schemes;
provide base projections for regional strategies; and
evaluate alternative development strategies.

The capacity to model regional growth can be harnessed to evaluate marketing decisions, and to ensure that public economic development and human development programs are clearly matched to regional needs.

National Economics' regional expenditure analysis can be used to develop and evaluate marketing strategies, to assess performance of companies within specific regional markets, provide a clear socio-demographic profile of existing customers and identify potential markets with metropolitan areas.

The Regional Models

National Economics has essentially three regional models. The State (SIMP) and Regional IMP (RIMP) models are used for forecasting state and regional activity, and assessing state and regional impacts. The Regional Household Information System (RHIS) uses microsimulation techniques to distribute estimates of household expenditure and incomes to regions as small as 200 households (Census Collectors Districts).

The regional IMP model uses data developed by RHIS to estimate regional household expenditures.

The state models provide estimates and forecasts of state economic activity on both a quarterly and an annual basis. Both models are based upon the detailed ABS state accounts with the quarterly model focusing on the coming two years harmonised with the annual state model. The annual model incorporates a detailed industry disaggregation and input-output structure. The dynamic input-output modelling used in this structure allows for detailed impact assessments to be made which identify first-round and flow-on impacts.

National Economics' integrated model of the eight Australian States and the integrated models of the Local Government Areas (LGAs) in each State. Both model types have the same structure as each State/LGA model, is built around a 100 industry input-output structure with each industry in each State/LGA linked to the same industry in every other State/LGA by interstate/inter-regional trade matrices. The models for each State/region are fully specified by employment, investment, exports, imports (international/interstate), household income generation function, etc. The models contain over 400,000 variables.

Model outputs

The state and regional IMP models provide estimates of:

population growth;
dwelling commencements;
housing stock;
employment by industry;
output by industry;
gross regional product; and
estimated consumption expenditure.

The models' results allow for inter-regional comparisons to be made and for sensitivity analysis of investment policy options.

Regional Planning and Consultancy

National Economics is well placed to analyse the economic impact of government at the regional and local level. Topics covered include the following:

regional, LGA and local incidence of Commonwealth taxes, social security payments and other major benefits including Medicare;
regional, LGA and local incidence of state taxes and services, including health and education services;
local public finance, including rate and grant revenues, user charge opportunities and expenditure requirements;
design of service eligibility criteria; assessment of take-up, and planning service delivery locations; and
impact of Commonwealth, state and local developmental programs.

Past projects have included:

drafting fiscal strategies at Council and regional authority level;
analysis of Council investments and asset management, particularly roads;
costing and strategy development for particular services, e.g. waste management; and
development of economic development strategies for Council and/or regional authority implementation.

Background for all projects is provided by National Economics' extensive local area database.

Regional Development Strategies

National Economics has assisted in the development of regional economic and social development strategies:

in regions ranging from Western Sydney to remote parts of the Northern Territory;
where the driving force varies from the encouragement of sophisticated export-oriented manufacturing to niche-market agriculture and gold mining; and
for private sector clients ranging from large investors to local community groups, and for public sector clients ranging from local government through regional agencies to state and Commonwealth agencies.