Economic Impact Analysis

Introduction
Decisions makers often wish to understand the wider economic effects of a certain policy, plan, industry or organisation. At first sight, this might seem simple. However, the task of quantifying broader economic effects is complicated by the highly-intricate nature of supply chains, wherein a change in one sector ripples through to other sectors.

For example, an increase in demand for new housing creates increased demands for building supplies, like roofing, which in turn creates demand for steel manufacturing, and so on.

To capture these wider economic effects, a special type of analysis – called multiplier analysis – can be used. It traces the impacts of a change in one sector through the various supply chains to determine the overall impacts on regional incomes, employment and GDP.

We have applied this technique to measure the economic impacts of various industries and organisations across New Zealand, and have even derived our own set of custom built regional IO tables to enable others to do the same.

Case Study: Economic Impacts of Auckland Airport
Auckland Airport is NZ’s largest airport and our international gateway to the world. In 2015, 16.5 million passengers arrived or departed Auckland via the airport. To better understand its wider economic effects, we were commissioned to undertake a formal economic impact assessment.

While some aspects were quite straightforward, a number of other aspects were not. For example, the airport is surrounded by nearly 1,000 ancillary businesses which are inextricably linked via a deep web of interrelated supply chains. To properly estimate the wider economic effects of the airport, these needed to be disentangled to avoid the risk of double counting (and hence overstating the airport’s economic footprint).

To overcome this obstacle, we undertook detailed desktop studies of surrounding businesses, followed up by a series of site visits. These enabled us to develop a fairly clear picture of supply chain relationships, which were hard-coded into the analysis. Following some useful feedback from the client, the analysis was finalised and the results written up in a clear and concise report. This work was later transformed into a brief of expert evidence, which we presented on behalf of the airport to the independent hearings panel for the PAUP. The panel’s recommendations supported our submission, and enabled the airport to secure a number of important changes to the planning rulebook. Read our report here. [download]

Other Recent Projects:
Other recent economic impact projects include:

  • The Largest Mussel Farm in New Zealand  [download]

  • The Largest Infant Formula Plant in New Zealand  [download]

  • NZ Aged Care sector [download]