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Aviation modelling

Research paper

15 December 2023

The Productivity Commission (PC) initiated this research in response to a request from the Treasury’s Competition Review in its consideration of competition issues in the aviation sector.

This research paper uses the PC National computable general equilibrium model to estimate the industry, sectoral and economy-wide effects of competition policy reforms in the Australian air transport industry.

The modelling shows that reforms associated with a 10% price reduction led to an increase in national output, real wages and the rate of return to capital. The story is the same at the industry level.

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Contents

  • Preliminaries: Cover, Copyright and publication detail, Contents and Acknowledgements
  • 1. Quantifying the nation‑wide impacts of reducing Australian air transport price
    • 1.1 Model overview
    • 1.2 Industry overview
  • 2. Causes of price decline
  • 3. Implementation
    • 3.1 10% decrease in price of domestically produced air transport services (simulation 1A)
    • 3.2 Improvement in MFP (simulation 1B)
    • 3.3 Combining the effects of model rent reduction and productivity improvements (simulation 1C)
    • 3.4 10% decrease in the price of imported air transport services (simulation 2)
  • Attachment: Stylised representation of the air transport sector in PC National
  • References
  • Appendix: Simulation results

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