Household consumption by state is determined by state posttax household disposable income and the average propensity to consume or save. With household propensity to consumer fixed, expenditure on individual products varies according to relative prices and household disposable income. Nominal government expenditure (including government consumption and other outlays) moves in line with the underlying drivers of government expenditure activity (such as population, unemployment, aggregate economic activity and prices). Average tax rates are assumed to remain fixed so that revenue moves in line with the various tax bases. The budget position is held fixed as a share of gross domestic product (GDP) or gross state product (GSP) through the use of lumpsum transfers to, or from, households. The aggregate of trade is assumed to decline to its longrun trend by 2018 and then remain fixed thereafter, while the price of individual exported products in domestic and foreign currency prices can vary with changes in the relative competiveness of exporting industries. Import prices are assumed to be fixed in foreign currency prices. Growth in labour productivity for each industry returns from its current 2014 growth rate to its longerterm average by 2018, and is applied in each region. The model index of consumer prices (CPI) is the model numeraire while the nominal foreign currency exchange rate varies. All domestic prices in the projection period are therefore real prices relative to the model CPI. Further detail of the assumptions made in the business-as-usual scenario are described in PC (forthcoming). As far as practicable, the modelling assumptions are aligned with historical experience in Australia. is inevitable uncertainty around these assumptions used to produce these projections. Generally, as the validity of assumptions are more uncertain over longer time periods, more caution is needed in interpreting results that are well into the future. Model parameters In CGE models such as VURMMI, some of the key parameters driving the adjustment to an external are the responsiveness of trade volumes and the responsiveness of labour and capital between activities and across regions to changes in relative prices. Parameters include: export demand elasticities domesticimport substitution elasticities primary factor substitution elasticities, and occupational transformation elasticities (supplyside) and substitution elasticities (demandside). The standard VURM parameter values have been used.
Household consumption by state is determined by state posttax household disposable income and the average propensity to consume or save. With household propensity to consumer fixed, expenditure on individual products varies according to relative prices and household disposable income. Nominal government expenditure (including government consumption and other outlays) moves in line with the underlying drivers of government expenditure activity (such as population, unemployment, aggregate economic activity and prices). Average tax rates are assumed to remain fixed so that revenue moves in line with the various tax bases. The budget position is held fixed as a share of gross domestic product (GDP) or gross state product (GSP) through the use of lumpsum transfers to, or from, households. The aggregate of trade is assumed to decline to its longrun trend by 2018 and then remain fixed thereafter, while the price of individual exported products in domestic and foreign currency prices can vary with changes in the relative competiveness of exporting industries. Import prices are assumed to be fixed in foreign currency prices. Growth in labour productivity for each industry returns from its current 2014 growth rate to its longerterm average by 2018, and is applied in each region. The model index of consumer prices (CPI) is the model numeraire while the nominal foreign currency exchange rate varies. All domestic prices in the projection period are therefore real prices relative to the model CPI. Further detail of the assumptions made in the business-as-usual scenario are described in PC (forthcoming). As far as practicable, the modelling assumptions are aligned with historical experience in Australia. is inevitable uncertainty around these assumptions used to produce these projections. Generally, as the validity of assumptions are more uncertain over longer time periods, more caution is needed in interpreting results that are well into the future. Model parameters In CGE models such as VURMMI, some of the key parameters driving the adjustment to an external are the responsiveness of trade volumes and the responsiveness of labour and capital between activities and across regions to changes in relative prices. Parameters include: export demand elasticities domesticimport substitution elasticities primary factor substitution elasticities, and occupational transformation elasticities (supplyside) and substitution elasticities (demandside). The standard VURM parameter values have been used.
migrant-intake-supplementb.docx