The macro-economic model used in the Audit is a computable generalised equilibrium (CGE) model that explicitly takes account of the Australian economy in a global context. For a country such as Australia, with large trade flows with the rest of the world, this is an important consideration.
The CGE model covers 70 sectors in the Australian economy. The various infrastructure sectors (and sub-sectors) considered in the Audit are included in the model:
■ transport is covered by five sectors in the model;
■ oil and gas are covered by six sectors;
■ electricity is covered by two sectors; and
■ water and telecommunications are each represented as single sectors in the model.
Interactions between the 70 sectors are incorporated in the model using, among other things, input-output tables prepared by the ABS. In other words, an input to one sector is an output from another sector. For example, the electricity used as an input in the manufacturing sector is an output from the electricity sector. The sectors in the economy are then represented geographically using the 73 audit regions.
Further detail on the modelling can be found in the ACIL Allen National Economic Analysis report.552
The modelling also used a conventional 'Public Private Partnership (PPP) approach', used by the Australian Treasury and others, in preparing the projections of the Australian economy. This approach considers three factors - Population change, labour force Participation rates, and assumptions about Productivity (PPP) - to arrive at the projections of growth in the overall Australian economy.
In the modelling, the labour force participation rate is projected to fall from around 65 per cent to 63 per cent by 2031. Consistent with projections prepared by others, the growth in labour force productivity is projected to be lower than over the last 30 to 40 years. In the modelling, labour force productivity is projected to grow at approximately 1.5 per cent per year to 2031.
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552. ACIL Allen (2014a). Appendix C in the report provides further detail.