COST of LIVING INDICATORS for TASMANIA: Final Report
Total Page:16
File Type:pdf, Size:1020Kb
COST OF LIVING INDICATORS FOR TASMANIA: Final Report JUNE 2011 PREPARED BY Yogi Vidyattama, Matthew Taylor and Robert Tanton, PREPARED FOR Tasmanian Department of Premier and Cabinet COST OF LIVING INDICATORS FOR TASMANIA: Final Report ABOUT NATSEM The National Centre for Social and Economic Modelling was established on 1 January 1993, and supports its activities through research grants, commissioned research and longer term contracts for model maintenance and development. NATSEM aims to be a key contributor to social and economic policy debate and analysis by developing models of the highest quality, undertaking independent and impartial research, and supplying valued consultancy services. Policy changes often have to be made without sufficient information about either the current environment or the consequences of change. NATSEM specialises in analysing data and producing models so that decision makers have the best possible quantitative information on which to base their decisions. NATSEM has an international reputation as a centre of excellence for analysing microdata and constructing microsimulation models. Such data and models commence with the records of real (but unidentifiable) Australians. Analysis typically begins by looking at either the characteristics or the impact of a policy change on an individual household, building up to the bigger picture by looking at many individual cases through the use of large datasets. It must be emphasised that NATSEM does not have views on policy. All opinions are the authors’ own and are not necessarily shared by NATSEM. © NATSEM, University of Canberra 2011 All rights reserved. Apart from fair dealing for the purposes of research or private study, or criticism or review, as permitted under the Copyright Act 1968, no part of this publication may be reproduced, stored or transmitted in any form or by any means without the prior permission in writing of the publisher. National Centre for Social and Economic Modelling University Drive South, University of Canberra, ACT 2617 Phone + 61 2 6201 2780 Fax + 61 2 6201 2751 Email [email protected] Website www.natsem.canberra.edu.au 2 COST OF LIVING INDICATORS FOR TASMANIA: Final Report CONTENTS About NATSEM 2 Author note 4 General caveat 4 1 Introduction 5 2 Methodology 6 2.1 STINMOD 7 3 Assessment of Tasmanian incomes and the effect of the current transfer system 7 4 Output 15 5 Conclusions 16 References 17 3 COST OF LIVING INDICATORS FOR TASMANIA: Final Report AUTHOR NOTE Yogi Vidyattama and Matthew Taylor are Research Fellows in the SISAM team, and Robert Tanton is Research Director of the Social Inclusion and Small Area Modelling (SISAM) Team at NATSEM. GENERAL CAVEAT NATSEM research findings are generally based on estimated characteristics of the population. Such estimates are usually derived from the application of microsimulation models or other economic modelling techniques to microdata based on sample surveys. These estimates may be different from the actual characteristics of the population because of sampling and nonsampling errors in the microdata and because of the assumptions underlying the modelling techniques. The microdata do not contain any information that enables identification of the individuals or families to which they refer. 4 COST OF LIVING INDICATORS FOR TASMANIA: Final Report 1 INTRODUCTION The National Centre for Social and Economic Modelling (NATSEM) has prepared this final report for the Department of Premier and Cabinet’s Social Inclusion Unit (SIU) who are responsible for research and analysis on social inclusion, policy advice and support for the Social Inclusion Commissioner, Premier and Cabinet and administration of funding for programs that reduce social exclusion. This report is produced to provide data for the SIU’s Cost of Living Strategy research. In the research, the SIU is analysing policy levers outside the control of the Tasmanian Government, in particular the role of the Commonwealth Government in setting payment levels for pensions and allowances as well as marginal/effective taxation rates. The data provided by NATSEM for the SIU are as follows: 1) The composition (using equivalised disposable incomes), range and distribution (household types, household income and age of the household reference person) of Tasmanian household incomes, as well as a comparison with all other states and territories of Australia (using ABS base datasets from 2005-06 and 2007-08 Survey of Income and Housing). 2) Disaggregation to the following categories where the data allows: a) Income source of household, Government pensions and allowances – Age/disability pension b) Income source of household, Government pensions and allowances – Unemployment, education and sickness allowances c) Income source of household, Government pensions and allowances – Other government pensions and allowances d) Income source of household – Wage and salary e) Income source of household – Own unincorporated business income f) Income source of household – Other income (superannuation or other private income) g) Income level of household – National quintiles of household equivalised disposable income (Lowest, Second, Third, Fourth, Highest) and the second and third deciles h) Composition of household – Lone person household i) Composition of household – One parent, one family households with one dependent child only 5 COST OF LIVING INDICATORS FOR TASMANIA: Final Report j) Composition of household – One parent, one family households with two or more dependent children k) Composition of household – Couple only l) Composition of household – Couple with one dependent child only m) Composition of household – Couple with two dependent children only n) Composition of household – Couple with three or more dependent children only o) Composition of household – All households (being a total of all households for the geography) 3) Modelling of the effect of the current tax/transfer system on Tasmanian incomes and by: a) Decomposing Gross Income into Gross Private Income, Transfers, Taxes and Disposable income b) EMTR 4) Estimates of financial stress 5) Estimates of house price for households (to determine the level of asset ownership of primary place of residence) 6) Estimates of labour force participation Besides the databases above, NATSEM has also provided this short written report that includes analysis and commentary on Tasmanian incomes, equivalised incomes, and comparisons within categories for Tasmania and other jurisdictions, using Gini coefficients and income poverty measures as well as an assessment of the effect of the current tax/transfer system on Tasmanian incomes, by comparing Gross Private Income and Disposable Incomes across the household groups. 2 METHODOLOGY The model used for this project is NATSEM’s in-house static microsimulation model of Australia's income tax and transfer system, STINMOD. The model is mostly used to analyse the distributional and individual impacts of income tax and income support policies and to estimate the fiscal and distributional impacts of policy reform. STINMOD has been used to analyse a wide range of policies including the major changes to the tax and transfer system introduced in Australia in July 2000, changes in effective tax rates over the last decade, and changes to single age pensions. 6 COST OF LIVING INDICATORS FOR TASMANIA: Final Report 2.1 STINMOD STINMOD is a model that has been used to calculate the simulated impact of major Australian federal government cash transfers, income tax and the Medicare levy. The model estimates the aggregate fiscal impact of a change in tax and/or transfer policy on revenue and government expenditure. The model also estimates the distributional impacts of policy change at the household level, for groups of people and individuals – that is, who wins, who loses and by how much. STINMOD works by applying the current and possible alternative settings of the tax and transfer system, which have been coded and regularly updated to reflect major changes in tax/transfer policies every year, to a sample population (basefile) which is constructed from the latest ABS Surveys of Income and Housing Costs. For this work, we have used the latest version of STINMOD, STINMOD/10, which has a basefile using combined data from the 2005/06 and 2007/08 ABS Surveys of Income and Housing. In addition, various demographic and administrative benchmarks are used to increase the accuracy of the modelling, and economic indicators are used to inflate the earnings and other monetary values reported by those Australians captured in the ABS surveys to current values (as the surveys are always some years out of date). The rates and payments settings of the tax and transfer system (parameters), which are also regularly updated, are used to determine and calculate different tax and income variables for each of the individuals and families in the sampled population. STINMOD is updated each year, to take into account the latest Government policies, inflate financial data, and bring in any new survey information. The version used for this work is STINMOD/10, which uses the 2005-06 and 2007-08 Surveys of Income and Housing. This latest model includes a range of improvements over past models following a thorough review undertaken by NATSEM and the Australian Government. For example, the latest STINMOD includes detailed information on housing costs including rents and mortgages. Housing costs are taken from the ABS survey data and updated to 2011 values using appropriate inflators. Rents