Regional input-output analysis
Input-output information is available for the Australian economy as a whole and is collected by the ABS. With this information a system of building blocks is used each of which shows, for a product (or more commonly combination of products):
- its origin or source of supply divided into domestic production and imports;
- its destination classified into usage by various industries and final demand categories; and
- the difference between the basic price and the purchaser's price for each product or margin.
National Economics has developed the region specific input-output tables with the creation of YourPlace-IO. The geographical unit of analysis is the local government area (LGA) and up to 7 LGA's can be aggregated to create a regional economy.
This process can broadly be explained in four steps and is undertaken for every region. These are elaborated on below.
STEP 1 Prepare the national indirect allocation of imports table.
STEP 2 Gather all economic data on the region of interest, including industry output and consumption expenditure.
STEP 3 Analyse the regions industries input requirements given its output.
STEP 4 See how much of this input requirement can be sourced from local production.
The input-output tables are estimated for the 106 industries in the national input-output tables prepared by the Australian Bureau of Statistics (ABS). The ABS tables have 107 industries. However, data limitations forced aggregation of two: the agriculture and livestock industries. YourPlace-IO uses the YourPlace data estimates for each LGA for:
- private consumption expenditure for 400 categories;
- construction expenditure;
- equipment expenditure;
- government consumption expenditure; and
- industry output.
YourPlace-IO estimates exports and imports by 106 industries; and then calculates input-output relationships based on the indirect allocation of imports by the ABS methodology.
To measure the strength of the supply chain within a region, however, the indirect allocation tables have to be converted to tables based on the direct allocation of imports into the LGA (Step 4). These tables show the inter-relationships between industries operating within each LGA boundary.
Such tables are estimated from:
- the LGA indirect import allocation tables (technological tables); and
- the national direct import allocation tables (as described above).
Once all the steps are undertaken the following scenario can be analysed. A specific example using the meat industry will be considered. Suppose for a region it is found for the meat industry that the column sum is 1.41. This means that for each $1 million of demand for the meat industry in an LGA that $0.41 million of additional output is generated by other industries in the LGA.
The increase in the output of other industries will represent the supply from the:
- agriculture;
- business services;
- energy;
- transport; and
- other manufacturing industries,
into the next industry to enable the meat industry to function. The more the meat industry sources its supplies of goods and services from outside the region, the smaller will be the 1.41 column sum. This figure is refereed to as a Type I multiplier.