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Jodie Patron - KPMG: What do economists think they know about defence?

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Jodie Patron, Associate Director, KPMG delivered this presentation at the 2014 ADM Congress. Event attendees were able to hear presentations from senior government ministers and defence officials with …

Jodie Patron, Associate Director, KPMG delivered this presentation at the 2014 ADM Congress. Event attendees were able to hear presentations from senior government ministers and defence officials with a focus on the theme 'What does government want of industry?'

The Congress will connected industry delegates to government ministers and Department of Defence Personnel as well as speakers from Prime contractors and SMEs. A diverse program of speeches, panel discussions and workshops addressed key defence developments, capability innovations, project management, defence procurement and planning for the future. For more information about the annual event, please visit the conference website: http://www.admevents.com.au/

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  • 1. What do economists think they know about Defence? ADM Congress 2014 Canberra, Australia Jodie Patron Associate Director, KPMG
  • 2. Contents • • • • Economic linkages (production side) Economic comparisons (expenditure side) Case study – economic impact assessments Case study – labour market / skill gaps © 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International. 1
  • 3. Economic linkages – Defence industry cost structure Source: ABS 2009-10 Input-output table © 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International. 2
  • 4. Economic linkages – what does Defence buy? Source: ABS 2009-10 Input-output table © 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International. 3
  • 5. Economic linkages – who does Defence buy from? ($ million) Source: ABS 2009-10 Input-output table © 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International. 4
  • 6. Economic linkages – activity in the economy (share of total employment/GDP) Source: ABS National Accounts, ABS Labour Force Survey, Defence Annual Reports Defence employment defined as permanent forces (from Defence Annual Reports) plus defence civilian employment (from ABS Labour Force Survey) © 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International. 5
  • 7. Economic comparisons – growth rates (chain volume measures) Source: ABS National Accounts, International Monetary Fund © 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International. 6
  • 8. Economic comparisons – volatility (change in share of GDP – index: 1997-98 = 1.00) Source: ABS National Accounts, International Monetary Fund © 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International. 7
  • 9. Case Study – Economic Impact Assessments • used to identify, for example, the contribution of Defence facilities to a region, or the impact of undertaking a major projects. • the impacts can be thought of occurring in two parts Construction phase Operation phase Agriculture, Forestry and Fishing -7 -1 5 Retail Trade Electricity, Gas, Water and Waste Services 2 Transport and Storage 63 Construction -1 11 Finance and Insurance 13 Wholesale Trade Property and Business Services Accommodation and Food Services Financial and Insurance Services Professional, Scientific and Technical Services Health Care and Social Assistance -5 -4 Education 16 2 Health and Community Services 2 Other -5 -20 Total 0 20 40 60 4 7 4 68 80 © 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International. 45 Government Administration 7 Other Services Other Industries -1 Construction -4 Mining Manufacturing Manufacturing -1 8
  • 10. Case Study – Workforce Analysis - framework Labour Demand 2. Employment by occupation (Occupational Demand Model) 1. Employment by industry (Macro CGE model) Model system control of inputs and outputs 3. Population by age groups (Demographic Model) 4. Labour force by education (Education Model) OUTCOMES: Skills Gap Estimates 5. Labour force by occupation (Occupational Supply Model) Labour Supply Produces projections of potential skills gaps for detailed occupations (based on the Australian Bureau of Statistics’ ANZSCO 4 Digit Classifications). Provides an understanding of potential future labour market pressures in an economy. © 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International. 9
  • 11. Case Study – Workforce Analysis – example results Shortages Forecast of Top Four Construction Related Occupations by Gap in 2012/13, Australia Occupation 2011/12 2012/13 2013/14 2014/15 2015/16 2 3 4 Construction + Engineering Managers Other Building and Engineering Technicians + Signw riters Architectural, Building and Surveying + Civil Engineering Technicians index Tight V tight V tight V tight V tight share indicator 0.51 0.51 0.51 0.51 0.51 index 1 Chemical + Materials + Civil + Electrical Engineering Professionals Tight V tight V tight V tight V tight share indicator 0.76 0.76 0.76 0.76 0.76 index Tight Tight Tight Tight S tight share indicator 0.33 0.33 0.33 0.33 0.33 index Tight Tight Tight S tight S tight share indicator 0.72 0.72 0.72 0.72 0.72 Source: ABS Cat No.6291.0.55.003; ABS Cat No. 6227; and KPMG forecasts © 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International. 10
  • 12. Case Study – Workforce Analysis – Major project impacts To identify potential wage pressures relating to the specific needs of the project, an index can be constructed to identify wage pressure at each occupational level. This indexing combines two important inputs:  national inflation forecasts; and  estimates of the relative scarcity for each occupation based on skills gap projections 1,600,000,000 1,400,000,000 1,200,000,000 1,000,000,000 800,000,000 600,000,000 400,000,000 200,000,000 0 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 COST_NATIONAL_ACCU COST_OCCUPATIONAL_ACCU COST_OCCUPATIONAL1_ACCU © 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International. 11
  • 13. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. © 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

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