Our CGE Capability

Cadence Economics specialises in applied computable general equilibrium (CGE) modelling. Our team has collectively worked in the field for 42 years, completing hundreds of projects over that time and pioneering innovative and leading-edge techniques.

We maintain and operate our own in-house CGE model called CEGEM (the Cadence Economics General Equilibrium Model). It is a large scale, dynamic, multi-region, multi-commodity CGE model of the world economy. It meets the standards of both industry and academia, providing clients with a single, robust, integrated economic framework in which to analyse economic developments over time. The model allows us to undertake forecasting or assess the impacts of policy changes on key economic variables such as output, employment, consumption, imports and exports.

We have taken a 'best of breed' approach to developing CEGEM. Our model combines the best features of global modelling techniques, combined state and regional modelling frameworks. This allows us to apply our modelling at the global, Australia-wide, State and Territory and sub-state levels.

We have applied CGE modelling to a wide range of issues, broadly classified below under:

  • economic impact assessment of major projects
  • policy analysis
  • regional economic analysis
  • tourism (sports, culture and major events)
  • economic forecasting
  • linking CGE modelling to other modelling frameworks
  • global trade analysis

Economic Impact Assessment of Major Projects

One of the primary uses of a CGE model is to determine the economic impacts of both the construction and operational phases of an investment project on key economic indicators. We have undertaken these assessments across a wide range of projects and infrastructure investments. We have assessed the economic impacts of some of the largest private sector investments both in Australia and overseas, with the projects being assessed at the national, state and sub-state levels.

We have also combined our CGE and BCA (Benefit Cost Analysis) frameworks to contribute to more formal Economic and Social Impact Assessments (ESIA) in the coal, iron ore, and gas sectors.

Outside of the resources sector, we have undertaken modelling of investments in manufacturing, tourism, events and cultural related investments, property developments as well as energy sector developments.

Cadence Economics has in-depth experience analysing the economic, social and environmental impacts of new infrastructure investments. Our work has spanned transport infrastructure (roads, rail, airports and ports), utilities such as energy and water as well as ICT infrastructure such as the National Broadband Network (NBN) and mobile telecommunications.

Policy Analysis

Australia has a long history of using applied computable general equilibrium (CGE) modelling to inform public policy, from the Industry Assistance Commission's use of ORANI in the debate around tariff protection to ABARE's use of GTEM to inform the government's position on international climate change agreements.

Applied CGE modelling is an important tool in estimating the economic impact of policy changes. We have undertaken a raft of policy related work for government clients considering the impacts of proposed policy changes, as well as for private sector clients looking to understand the potential impact of policy changes on their operations or contribute to the policy debate on particular issues. We have considered a wide range of policy issues such as climate change, taxation, defence procurement, reforms in the energy market and the benefits foreign direct investment.

We have also extended the use of CGE modelling into public policy in a number of innovative ways. For example, based on our CGE modelling we applied CBA techniques and used the model as a key tool in undertaking a range of program reviews, business cases and the impact of regulatory changes.

Regional Economic Development

Cadence Economics has tailored its CGE modelling capability to enable analysis of regional economic issues. In CEGEM, our regions are represented as fully functioning economies in their own right with trade links to other regions in Australia and overseas. Our analysis frequently considers economic impacts at the local government area (LGA) level, and sometimes at finer levels of detail depending on data quality.

Our experience in regional CGE modelling is broad. Indeed, the majority of our major project evaluations have been undertaken on a bespoke model with regional detail. We have analysed the regional impacts of a raft of major infrastructure investments and analysed a range of factors affecting regional development such as the water availability, review and analysis of regional growth policies, the impacts of climate change response policy.

Tourism (sports, culture and major events)

The ubiquitous nature of tourism makes it ideally suited to economy-wide analysis using CGE modelling, and the team at Cadence Economics has a considerable track record in economic modelling around tourism and related activities such as sport, culture and major events.

We have conducted a number of economic impact assessments of tourism related investments such as convention centres, hotels and attractions such as theme parks. In addition, we have assessed ex-ante and ex-post sporting and cultural events.

Economic Forecasting

CEGEM is a dynamic CGE model that allows us to undertake forecasting on a year-by-year basis. The advantage of forecasting with a CGE model is it imposes the necessary rigour to ensure internal consistency and that the appropriate industry and regional linkages are captured. Our methodology is based on collating key assumptions from the most appropriate sources and applying them to our modelling framework in order to produce a robust, detailed forecast.

We have applied our CGE model to a number of forecasting exercises from long-range global economic growth forecasts to more granular forecasting such as energy demand and associated greenhouse gas emissions and estimating the demand for labour and skills.

Scenario Analysis

Scenario development can be a powerful analytical tool for understanding uncertainty. Scenarios provide an opportunity to explore different possible futures, and consequently new risks and opportunities facing industries, sectors and economies as a whole. Given its flexibility, CGE modelling is ideally suited to scenario analysis allowing us to test key assumptions underpinning economic forecasts.

Linking CGE Modelling to Other Modelling Frameworks

The team at Cadence Economics is able to link the economy-wide CGE framework to various other models, to provide additional richness in the specification of certain issues or to endogenise (ie allow feedback loops) between a detailed market model and the economy-wide CGE model.

At the macroeconomic level, we have linked demographic, labour market and convergence models to allow for long term forecasting at the global, national and sub-national levels.

At the sectoral level, our modelling has incorporated electricity market models to allow more robust analysis of energy and climate change issues; transport models to consider the economic impacts of road investments and econometrically estimated sectoral demand models to assist with the analysis of a range of issues relating to this sector.

Global Trade Analysis

With a detailed representation of global trade and investment flows, our modelling capabilities are ideally suited to analysing issues of international trade.