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Using Real Expenditure to Assess Policy Impacts

Staff research note

This research note by Xiao-guang Zhang was released on 9 December 2019.

Measuring the economy-wide welfare impact of policy and other changes remains a challenge. With changing trade policies in foreign markets, patterns of productivity slowdown in developed countries, and debate on the relative merits of competing public infrastructure investments, accurately gauging welfare implications for Australians is important.

Simple national-accounting aggregates (such as GDP or private consumption) tell only part of the story, while more theoretically complete, utility-based measures are harder to relate to policy-makers and non-technical audiences.

This note proposes real Gross National Absorption (GNA) as a measure of the overall impacts on a national economy of policy changes in applied analyses.

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