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Input-Output Methodology
Conference 2010
Education How are the upstream impacts calculated, or in other words, how are the
e-Newsletter sectoral supply chains traced accurately?
Partners The generalised input-output analysis framework is based on the input-
output (I-O) tables compiled and published by the Australian Bureau of
Statistics (ABS). The method by which the ABS constructs Australia’s I-O
tables both ensures that the extremely complex interdependencies between sectors are described in a complete
and detailed way, and that there is consistency in this description across all sectors. All the upstream linkages (the
supply chains) are therefore encapsulated in the I-O tables.
But how can you compare a dollar of final consumption of alumina production with that of hairdressing?
Different sectors clearly perform different functions in the economy. Income from commodity exports helps
Australia to offset the cost of its imports. Also, processors and manufacturers in the value-adding chains can
capitalise on the sometimes poor environmental and social performance associated with the supply of raw
materials from the resource sectors. Nevertheless, using final consumption to explore the links between industrial
sectors and their relative impacts can help achieve efficiency improvements by informing
socio/economic/environmental policy development. Note that alumina production workers get their hair cut too!
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responsibility.
Can the methodology and results be sensibly applied at a sub-national scale to deal with local and regional
issues?
The methodologies used for this report are applicable at a regional level. The main requirement is that inter-
regional economic data be compiled. The ISA team at the University of Sydney is currently scoping work for
expanding the national TBL framework to the State and Territory level.
How would this study be updated and how might this report be used as a benchmark?
Now that the methodology, data sources and understanding are established, a model update is straightforward,
and needs only a recent set of input-output and TBL factor data. All these data are compiled regularly by various
agencies for a variety of other users. The data is usually collected and compiled in a standardised way, so results
would be comparable between different years (also see questions in the indicators section).
Why are the indicators grouped into Accounts #1, #2 and #3?
This presentation provides a visual picture of the TBL indicator sets. It was agreed in initial discussions scoping the
structure of the report that the grouping of profits/employment/greenhouse was likely to be of most interest,
followed by exports/income/water and then imports/government revenue/land disturbance. For ease of
presentation, the 10th indicator energy is omitted from some of the representations, although we often delve into
it in the comments. This is because on balance, the key policy issue is greenhouse emissions rather than energy
input.
How can you describe a sector’s TBL performance properly in five pages?
We see the sectoral description as a summary and starting point, not as definitive or exhaustive. It explains the
meaning of the standardised results (intensities, averages, contribution to GDP, supplying sectors, etc) in terms of
the key attributes of the sector, and identifies some likely future developments. These sector analyses provide
comparable and reproducible numerical results which could provide a basis for more detailed sectoral studies (in
fact the ISA team at the University of Sydney is currently conducting more detailed research on several sectors).
Why do you use the economy-wide mean for the factor (rather than for example a median) as a reference point?
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The economy-wide mean is used because it is the best way to realistically compare sectors which have very
disparate sizes and performance across the different factors. The value of the averages as a definitive benchmark
could be debated, but nevertheless they are useful reference points for analysing relative performance.
How can you put a dollar value on issues like land disturbance, which are related to biodiversity loss and
extinctions?
This report doesn’t put a dollar values on any of the non-financial indicators: these remain in physical units (eg.
square metres of land, litres of water, minutes of employment). What it does is reveal the environmental (and
financial and social) resources that underpin every dollar in the economy. The methodology uses national I-O
tables in monetary terms as the structure of the human economy, and as such connects every physical impact via
a monetary intermediary. As a result, important non-market effects, hidden subsidies, non-valued services,
resource depletion etc are not included.
Water quality is a critical consideration in Australia. How does this fit in the study?
The water indicator used in this analysis focuses on the volume of mains and self extracted water used. Water
quality is not covered by the report. However it would be possible to incorporate reused and recycled water in
future work, using similar concepts as contained in the weightings used in the land disturbance indicator. Some of
the data to perform this improvement is available now and it is planned to be incorporated into the model. Ground
water depletion and contamination are also areas requiring further development.
This analysis is static. How can it be relevant at all for policy instruments?
It is true that this type of analysis cannot be used for forecasting - there are no prices or behavioural variables in
the model. However, this is not the motivation for the work. The work is relevant as a documentation of sectoral
performance, with these benchmarks and results being very applicable to company reporting (see question below).
Short-run policy analyses, looking at the effects of say a 20% change in the price of oil will still be made using
such techniques as computable general equilibrium (CGE) modelling. However, these models also have difficulty in
dealing with major technological change and price shocks.
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How does this report relate to the Global Reporting Initiative (GRI)?
The GRI is a quasi-standard for undertaking TBL audits for companies. As with all audit techniques, a boundary is
drawn within which the audit is undertaken. Whilst being able to deal with the specificities of companies, the audit
approach cannot capture the full supply chain effects that is possible with the application of the sectoral I-O
approach. However, the two approaches fit well together in that a local audit of direct impacts is made (say using
the GRI framework), and then the remaining impacts outside the audit boundary are calculated using the I-O
derived multipliers. This hybrid method is a logical combination of the approaches and one that produces much
more consistent results for companies.
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