Tag Archives: economic modelling

God Spare Us From The Government’s “Modellers”

16 Apr

Media Release – Senator Barnaby Joyce, 16 April 2012:

Dodgy modelling on Murray-Darling plan means consultation falls short

New economic modelling on the Murray-Darling Basin plan shows that the government has failed to consider the economic and social impacts of its draft basin plan. The government must immediately commission new economic research which covers the entire Murray-Darling Basin.

The modelling by Chris Murphy, of Independent Economics, shows that the draft basin plan could lead to the loss of 2100 jobs and a 9 per cent reduction in economic activity in just five towns around Griffith.*

“Chris Murphy is one of Australia’s leading economic modellers. His work shows that the economic impact of the draft could be up to 10 times worse than what the government has admitted to date” said Senator Joyce today.

“The government’s economic modelling of the Basin Plan is a complete farce. It assumes that no irrigator will leave the region after water is bought back from a community. The reality is that Bilbo Baggins gets his cheque and retires to the Gold Coast. I raised this issue with the government almost two years ago in Senate estimates and they have completely ignored it.**

Chris Murphy’s model allows people to move away from irrigation and he shows convincingly that this reason alone makes the difference between his results and the governments.

“With work this dodgy it’s no wonder Tony Burke has yet to get the support of one State Government for the Draft Basin Plan.

“The government can’t reject the findings of this modelling because it has been partly funded by the government through its Strengthening Basin Communities program and Regional Development Australia funding. Unfortunately the funding has only been able to pay for modelling in one of the 21 catchments in the Basin.

“The government must immediately fund more economic modelling for the entirety of the Basin. Without it there can be no guarantee that we will deliver a triple-bottom line outcome.”

* http://www.independenteconomics.com.au/Latest.aspx

** Senator JOYCE—If it is a general equilibrium model, my understanding would be, for example: say I buy a place in Leeton—a town that you did not visit—and the money just goes to everybody in the town, not to the person you actually bought the licence from.

Mr Gooday—You are getting at the way in which we distributed the proceeds of the sale of the licences back into the regional economies. The way we modelled it is what you described. For a region that sold, say, $10 million worth of water entitlements, the modelling was done by putting $10 million back into the region by spreading it across each industry. We recognise in the report that that is probably not the ideal way to do it, but the general equilibrium model does not distinguish between farm households and irrigation households. So we were not able to do it the other way.

Senator JOYCE—It is not even vaguely close to what happens. What happens with the general equilibrium model is: Bilbo Baggins gets $5 million for his water licence and he goes and retires on the coast. He does not go back into town and buy battered savs off the local servo.

Mr Gooday—Yes. And we understand that. I think the real point here is the level at which the general equilibrium model is constructed. It really does not matter how we give the money back. It does not make any great difference to the results, because the regions are rather large, and each of these seven regions contains—

Senator JOYCE—This really brings us to the issue. Given the limitations of this study which we have just spelt out—and that has been in 10 or 15 minutes—in your view, does the study’s conclusion support the minister’s view that the report, and I quote:

… confirms that the Rudd Government’s long-term Water for the Future plan is supporting the future viability of our Basin communities and returning the rivers to health …

Senator NASH—That is hilarious.

Mr Gooday—The report says what the report says.

http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=@Hansard/S13017.pdf

16 April 2012

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