ECONOMIC DEVELOPMENT QUARTERLY
• Reducing the frequency and severity of crashes
associated with overtaking, fatigue and the
uneven road surface;
• Improving access for high productivity freight
vehicles; and
• Attracting tourist visitation and spending,
particularly drive tourism.
It is stated by Austroads (2016):
“The rationale for remote and regional roads
is typically related to improving accessibility
to a particular region, leading to associated
improvements in wider social and economic
outcomes”.
This means travel time and vehicle operating
cost savings are often not the primary reason for
investing in remote and regional roads. Accepting
that the principal purpose of building roads is the
WEBs they generate, it follows that the emphasis
of evaluations of road projects in remote and
regional areas should switch to estimating the
value of the productivity dividend delivered to the
regional economy. The question is – how can this
be achieved?
A METHODOLOGY FOR ESTIMATING
WEBS
In order to reliably estimate the WEBs generated
by a road project the following steps are
recommended:
Step 1: Document the Output of Industry
Sectors - Data on output by industry sector is
available from the Australian Bureau of Statistics
(ABS), or alternatively from the web-based product
‘REMPLAN Economy’.
Step 2: Estimate Output Uplift for Industry
Sectors - This step should focus on the key sectors,
which in many regional and remote areas are
agriculture, mining, transport and tourism. Estimates
may be informed by case studies and supply chain
analysis to identify the factors of production that can
be affected to deliver a productivity uplift.
Step 3: Model the Multiplier Effect - Uplifts in
outputs in key industry sectors will have a multiplier
effect in the regional economy. From a direct
increase in output there will be an increase in the
demand for intermediate goods and services. These
‘industrial effects’ include multiple rounds of flow-
on effects, as servicing sectors increase their own
output and demand for local goods and services
in response to the direct change to the economy.
The increases in direct and indirect output would
typically correspond to the creation of jobs in the
economy.
Corresponding to this change in employment would
be an increase in the total of wages and salaries
paid to employees. A proportion of these wages and
salaries are typically spent on consumption and a
proportion of this expenditure is captured in the local
economy. Total output, including all direct, industrial
and consumption effects can then be estimated.
This modelling can be done by reference to
the Australian Bureau of Statistics’ input-output
tables, but these are somewhat static and dated.
REMPLAN Economy Software provides a menu-
driven model to make these estimates.
Figure 1. A Methodology for Evaluating Wider
Economic Benefits
Document
the Output of
Industry Sectors Estimate
Output Uplift for
Industry Sectors
Estimate
Value-Added Cost-Benefit
Analysis
including WEBs
Model the
Multiplier Effect
Source: SC Lennon & Associates
Step 4: Estimate Value-Added - The productivity
dividend for a region is measured in terms of ‘value-
added’ where thi s is defined as follows:
Value-Added data represents the marginal
economic value that is added by each industry
sector in a defined region. Value-added can be
calculated by subtracting local expenditure and
expenditure on regional imports from the output
generated by an industry sector, or alternatively,
by adding the wages and salaries paid to local
employees, the gross operating surplus and
taxes on products and production. Value-added
by industry sector is the major element in the
calculation of Gross Regional Product / Gross
State Product / Gross Domestic Product.
(Source: REMPLAN Economy Software, December 2017)
Again, REMPLAN Economy Software provides a
menu driven model to provide an estimate of value-
added.
VOL.11 NO.1 2018 | 16