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Tuesday, 14 August 2012
Page: 8609

Treasury: Economic Modelling

(Question No. 463)

Mr Hockey asked the Treasurer, in writing, on 16 August 2011:

How many times in the last three years has the Treasury undertaken economic modelling, and on which issues has this modelling been undertaken.

Mr Swan: The answer to the honourable member's question is as follows:

Divisions across the department undertake a wide variety of economic and quantitative analysis, dealing with a wide range of issues that could be categorised as economic modelling. More formal and extensive modelling is undertaken principally by the Macroeconomic Modelling Division, Domestic Economy Division and Tax Analysis Division.

Treasury's Macroeconomic Modelling Division has undertaken extensive economic modelling on the impact of a carbon price. Economic modelling was released in October 2008 and reported in the Government's Australia's low pollution future: the economics of climate change report. Additional modelling was released in July 2011 and reported in the Government's Strong growth, low pollution: modelling a carbon price report. The Macroeconomic Modelling Division also maintains and develops a range of models which are used to help inform policy debate such as tax reform and assist in projecting aspects of the economy.

Treasury's Tax Analysis Division performs the key functions of revenue forecasting, developing cost estimates and distributional analysis, and undertaking other quantitative studies. Economic modelling plays a part in all these functions and, accordingly, amounts to a large part of the day to day activities of the division, rather than being some discrete exercise undertaken from time to time. The issues on which the modelling is undertaken cover the range of matters handled by the division.

Treasury's Domestic Economy Division maintains a range of models which are used to help forecast different aspects of the economy. These models are typically used heavily during forecasting rounds, particularly ahead of the Budget and MYEFO but, because they are being continuously updated and refined, are often run more frequently. These sectoral models complement other sources of information, such as information from business liaison, when producing the macroeconomic orecasts.

In addition, as part of the Review into the governance, efficiency, structure and operation of Australia's superannuation system, Treasury conducted modelling to estimate the possible long-run and short-run, direct and indirect impact of the review's recommendations on superannuation fees.