Final Report on RREF 2001 - Department of Health

Part B: Development of Options for a Revised RREF
• The weight for the Koori population is doubled as the Commonwealth provides
double the per capita funding for the Koori population in each state;
• The five non-metropolitan regions get a rural weighting of 5%, an arbitrary
decision;
• The two regions of greatest socio-economic disadvantage, as measured by the
IRSED, are weighted by 10%; the decision to give these regions a weighting
recognises the effect of socio-economic disadvantage on need for disability
services, but the decision to weight only two regions, and both by 10%, is arbitrary.
4.2 PRINCIPAL COMPONENTS ANALYSIS
In considering options for relative weighting of the variables, the RREF Review undertook a
principal components analysis (PCA). PCA can provide an indication of the contribution that
each variable makes to the total variation among all the variables when they are considered
together. PCA is especially useful when there are a large number of possible contributory
variables and the impact of each is not readily apparent.
PCA was carried out to test the relationships between five of the weighting variables. The
ARIA was excluded as in preliminary analysis it was found to swamp the effect of all other
variables. The residential care shortfall variable was also excluded as it did not correlate with
any of the other variables and so did not contribute to any component. Two principal
components were identified:
1. The two variables that contributed most to the first component were median
household income and life expectancy. High correlation between these two
variables indicated a substantial overlap and rather than using this first
component in the RREF, the preferred option is to use each separately and to
model one option including both variables and one including median household
income only.
2. The two variables that contributed most to the second component were Koori
population and population speaking a language other than English at home.
The contributions of these variables were inversely correlated, and it can be
concluded that each contributes to the component in a different way and that
including each in the RREF as a separate variable has a similar effect to
including the second component.
The first component explained 50% of the total variance and the second component 25%.
Inclusion of the three variables that contributed strongly to the two principal components -
median household income, cultural diversity and Koori population - in the RREF captures a
large proportion of the total variance. The component loadings did not however give any clear
guidance that any one variable should be weighted more than the others.
4.3 EXPERT ADVICE
Expert advice was received from both the Departmental Steering Committee and the wider
Reference Group of representatives of provider and consumer groups. These two groups
brought together a wide range of statistical skills and practical experience in the field.
<strong>Final</strong> <strong>Report</strong> July 2001 44