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Direct changes and flow on impacts
The identified changes have implications for prices and resources use. The
total value of the direct changes after ten years of operation is an increase
in GDP by about 1.6 per cent (out of the total 2.7 per cent rise in GDP, to
be discussed in more detail in Section 4.3 below. Direct changes will also
raise consumption by 2.8 per cent and increase community welfare
(measured in dollar terms) by 2.9 per cent. These are factored into the
MONASH model to identify the full flow on impact after all adjustments
have been made throughout the economy. These changes are often
referred to as ‘shocks’.
4.3 Simulation results
Macro economic outcomes
The trajectory of the difference greater use of e-commerce makes for
major macro economic impacts are plotted and explained in Exhibit 4.1
with a brief additional commentary about each variable. The major points
are as follows.
Output or GDP
The overall level of economic output, or GDP, may be higher by around
2.7 per cent by the year 2007 if A ustralia adopts greater use of
e-commerce than if it does not. Using the current size of the economy as an
indicator, that increase is equivalent to more than $14 billion per annum.
The increase in activity (real GDP) obtained by 2007 is equivalent to
achieving 11 years of economic growth in ten.
Composition and pattern of growth
Real GDP increases as there are progressive increases in the extent of
adoption of e-commerce in the economy at large. Three broad factors
shape the composition of growth.
Firstly, the economy makes better use of existing capital and labour. In
economic terms there is an increase in total factor productivity. This
technological change accounts for the majority of the increase in growth.
Secondly, more capital is invested in the economy raising the availability
of this factor of production. The capital stock increases because the
productivity gains brought about by greater use of e-commerce increase
wage rates relative to capital rental rates . This occurs with a lag as
investors react cautiously to changes in rates of return and the change is
gradual. In the long run it is expected that rates of return will return to
levels that would prevail without an e-commerce impact (as market forces
bring rates back into balance).
Although additional capital inflows and investment are associated with
productivity gains, and are largest when those gains are being enjoyed, the
expansion in the economy also leads to a sustained increase in investment.
It is assumed the additional capital is sourced from abroad through
foreign savings and investment (i.e. it is not assumed that e-commerce
changes Australians’ savings patterns). These factors have implications for
changes in the exchange rate (explained in Exhibit 4.2).
Thirdly, there is an increase in the supply of labour, another factor of
production. This stems from time savings for producers and consumers.
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