1. Microsimulation in Australia: lessons from NATSEM
Presentation to ESRC/BSPS
UK Microsimulation: Bridging the Gaps Seminar
Sussex University, September
Justine McNamara

2. Acknowledgements
Thanks to Ann Harding and other senior management and staff at NATSEM for their contributions to this presentation
Thanks to ESRC/BSPS

3. Background Australia NATSEM Defining ‘success’
Australia – 22 million, much on east coast; Federal system; recent political history
Success could include academic merit, success with self-funding, research being used in the policy process –for N perhaps latter is key
NATSEM – UC; around 15 FTE researchers; microsimulation and microdata analysis; self-funding
Me – 5 years, social work, CaF/Small area

4. Outline of presentation
Establishment of NATSEM
Self-funding
Development of modelling capabilities
Cross-model synergies
Extending models
Public policy applications
Staffing
KEY SUCCESS FACTORS

5. History of NATSEM
National Centre for Social and Economic Modelling (NATSEM) established 1993 at University of Canberra
First academic research centre to specialise in microsimulation modelling in Australia
Key role of Ann Harding

6. History of NATSEM
Had 5 years of core funding from then Department of Health, Housing and Community Services ( )
Participation of govt on NATSEM Advisory Board
Early establishment of STINMOD model (static tax transfer model)
STINMOD now maintained by NATSEM for govt
STINMOD actively used by Treasury & other depts (e.g. in Budget papers)

7. Establishment of NATSEM success factors
Visionary leader
Close connections with government/policy process
Got in first

8. History of NATSEM
Transferred from government funding to self-funding over 3 years
Reflected changing funding environment (short-term, competitive)
STINMOD pivotal in making this transfer successful
Very close internal monitoring of budgets/timelines (eg TRS)
Also change of govt in 1996

9. Self-funding success factors
Very strong emphasis on deliverables
Some ongoing STINMOD funding
Close collaboration with government officials
Marketing/awareness/reputation
Expanding vision
Staff with ability to bring in funds
Government departments that use microsimulation models
Also many challenges
22 govt agencies in partnership with NATSEM in last few years
Challenges include need for risk-taking, balancing academic and soft money, time and effort needed to get business/bring in grants.
Head of treasury an expert modeller

10. Development of modelling capabilities
STINMOD
DYNAMOD
Health modelling (MediSIM, CareMOD, Diabetes)
ChildMOD
HouseMOD
SpatialMSM
APPSIM
NATSEM is in the process of building a dynamic microsimulation model, the Australian Population and Policy Simulation Model (APPSIM). This model is being developed to assess the distributional and intergenerational impacts of policies designed to deal with the ageing population in Australia.

13. MediSim: The Australian Pharmaceutical Benefits Scheme
PBS aims to provide affordable access to prescription medicines
MediSim constructed on top of National Health Survey microdata and simulates changes in
the drugs listed under the PBS
drug prices
the rules (settings) of the PBS – copayments and safety net thresholds
costs to government and consumers
the distributional impacts
Imputed medicine use on the basis of self-assessed health status, long-term conditions, imputed short-term conditions. Benchmarked to meds per person and total dollars data from Medicare.
For Medicines Australia

14. % of PBS outlays received by each income quintile of Australians
*Source: Harding et al, 2004

15. Building modelling capabilities success factors
Joining up with powerful partners who can provide funding, including private sector organisations
Starting small and building out
Developing cross-disciplinary linkages where microsim is part of a larger project focused on particular subject area
Challenges include:
Pros and cons of advisory boards/steering committees
Over-committing

16. Cross-model synergies/extending models
STINMOD often key
Spatial microsimulation methodology used for health, housing, broader socioeconomic modelling
Dynamic modelling, spatial modelling can be linked to STINMOD
APPSIM may inform dynamic dementia model
Some micro/macro collaborations

17. Links between models (examples)
STINMOD
DYNAMOD
APPSIM
DYNOPTA
CHILDMOD
HOUSEMOD
SPATIALMSM
CAREMOD

18. CHILDMOD – An alternative child support scheme
A recent STINMOD extension
Child Support Scheme requires separated parents to each contribute to the costs of raising their children
Many concerns about Scheme -> Ministerial Task Force established to review scheme in 2004
Govt accepted Ministerial Task Force recommendations: new scheme started July 08
NATSEM built the Taskforce a ‘hypothetical’ (illustrative families) model (see Harding and Percival, 2007)

19. Proposed Scheme:Payments of Non-Resident Parent

20. Extending models success factors
Agenda management and agenda setting
Taking advantage of opportunities (needs sufficient flexibility)
Look ahead and identify possible issues, then approach potential partners
Challenges include:
Model maintenance

21. Cross-model synergies success factors
Acceptance by key policy players of STINMOD
Being able to see possibilities and identify possible connections
Sometimes co-operation with other agencies’ models falls short of actually joining models up
Challenges include:
IP issues

22. Public policy applications examples
STINMOD – tax reform, welfare to work
SpatialMSM – pension reform
HouseMOD – housing assistance

23. The Great Australian tax reform debate, 1998-2000
Introduction of 10% goods & services tax (like VAT)
Removal of existing inefficient indirect taxes (wholesale sales tax)
Major cuts in income tax
Large increases in social security to compensate poor
Question for Senate: how to ensure tax reform package is fair?
Answer: assess its distributional impact using microsimulation models -> use NATSEM
Compensation to poor increased after NATSEM analysis

24. Welfare to Work reforms, 2005 budget announcement
Move to make sole parents on welfare get jobs
Those on Parenting Payment Single before 1 July remain ‘pensioners’ (relatively generous payment)
Those commencing after 1 July 2006:
Go on PPS if youngest child aged < 6 years
Moved onto Newstart when youngest child turns 6
Start on Newstart immediately if youngest child aged 6 yrs +
NATSEM commissioned by welfare groups to analyse impact of change (see Harding et al, 2005)
Age of child later changed to 8 years after public debate

25. Public policy applications success factors
Close links with policy makers and an understanding of how policy is made
Need to undertake research for organisations across the political spectrum
ARC Linkage grants
AMP-NATSEM reports
Reputation for impartiality and quality
Reputation for delivering
Microdata analysis as well as microsimulation

26. Staffing success factors (and challenges)
Collegiate environment
Strong support for researchers from non-academic senior staff member
Multidisciplinary
Ongoing challenges
recruitment
loss of trained staff

27. Key success factors Visionary leader Willingness to evolve/innovate
Involvement with agenda setting
True collegiate/team environment and senior support
Public/media interested in distributional analyses
Staff with skills/focus on bringing in money
Continuing challenges:
Balance between academic/soft money priorities
Funding
Staffing

28. Selected references
STINMOD and STINMOD applications (static tax-benefit model)
Toohey, M and Beer, G, 2004, Financial incentives to work for married mothers under A New Tax System’, Australian Journal of Labour Economics, vol. 7, no. 1, p. 53–69, January
Harding, A., Warren, N., Robinson, M. and Lambert, S., 2000, ‘The Distributional Impact of the Year 2000 Tax Reforms in Australia’, Agenda, Volume 7, No 1, pp
McNamara, J, Lloyd, R, Toohey, M and Harding, A, 2004, Prosperity for all? How low income families have fared in the boom times, Report commissioned by the Australian Council of Social Service, the Brotherhood of St Laurence, Anglicare NSW, Family Services Australia, Canberra, October.*
A. Harding, R. Lloyd & N. Warren, 2006, "The Distribution of Taxes and Government Benefits in Australia", in Dimitri Papadimitriou. (ed), The Distributional Effects of Government Spending and Taxation, Chapter 7, Palgrave Macmillan, New York., pp
Harding, A, Vu, Q.N, Percival, R & Beer, G, “ Welfare-to-Work Reforms: Impact on Sole Parents” Agenda, Volume 12, Number 3, 2005, pages (
Harding, A., Payne, A, Vu Q N and Percival, P., 2006, ‘Trends in Effective Marginal Tax Rates, to ’, ,AMP NATSEM Income and Wealth Report Issue 14, September (available from
Lloyd, R, 2007, ‘STINMOD: Use of a static microsimulation model in the policy process in Australia’, in Harding, A and Gupta, A., Modelling Our Future: Population Ageing, Social Security and Taxation (eds), North Holland, Amsterdam.
Harding, A., Payne, A., Vu, Q.N., and Percival, R. ‘Interactions between Wages and the Tax / Transfer System’. Report to the Australian Fair Pay Commission, September 2006 (available from )
CHILDMOD (static child support model)
Ministerial Taskforce on Child Support, 2004, In the Best Interests of Children – Reforming the Child Support Scheme, Report of the Ministerial Taskforce on Child Support, May (see Chap 16 for output from CHILDMOD) (
Harding, A. and Percival, R. 2007, ‘The Australian Child Support Reforms: A Case Study of the Use of Microsimulation Modelling in the Policy Development Process’. Australian Journal of Public Administration, Vol. 66, No. 4, December, pp

29. Selected references
MediSim (static model of the Pharmaceutical Benefits Scheme)
Brown. L., Abello, A., Phillips, B. and Harding A., 2004, "Moving towards an improved microsimulation model of the Australian PBS' Australian Economic Review., 1st quarter
Abello, A., Brown, L., Walker, A. and Thurecht, T., 2003, An Economic Forecasting Microsimulation Model of the Australian Pharmaceutical Benefits Scheme, Technical Paper No. 30, National Centre for Social and Economic Modelling, University of Canberra.*
Harding, A., Abello, A., Brown, L., and Phillips, B The Distributional Impact of Government Outlays on the Australian Pharmaceutical Benefits Scheme in , Economic Record, Vol 80, Special Issue, September
Brown, L., Abello, A. and Harding, A Pharmaceuticals Benefit Scheme: Effects of the Safety Net. Agenda, vol. 13, no. 3, pp
Diabetes Model
Thurecht, L, Brown, L. and Yap, M. (2007) Economic Modelling of the Prevention of Type 2 Diabetes in Australia. Paper presented at the International Microsimulation Association Conference, Vienna, August 2007.
Brown, L., Harris, A., Picton, M., Thurecht, L., Yap, M., Harding, A. Dixon, P. and Richardson, J. (2007) Linking Microsimulation and Macro-Economic Models to Estimate the Economic Impact of Chronic Disease Prevention. Paper presented at the International Microsimulation Association Conference, Vienna, August 2007.

30. Selected references
APPSIM (dynamic Australian Population and Policy Simulation Model )
Keegan, M. (2009) Mandatory superannuation and self-sufficiency in retirement: An application of the APPSIM dynamic microsimulation model. Paper presented at the 2nd General Conference of the International Microsimulation Association, Ottawa, Canada, June 2009
Keegan, M. and Kelly, S. (2009) Dynamic microsimulation modelling of social security and taxation. Online Working Paper 14.
Lymer, S. (2009) Population ageing and health outlays: assessing the impact in Australia during the next 40 years. Paper presented at the 2nd General Conference of the International Microsimulation Association, Ottowa, Canada, June 2009.
Pennec, S. (2009) APPSIM - Cohort component population projections to validate and align the dynamic microsimulation model APPSIM. Online Working Paper - WP12
Percival, R. (2007) APPSIM - Software Selection and Data Structures. Online Working Paper - WP3 
SpatialMSM (static spatial microsimulation model)
Chin, S-F, Harding, A., Lloyd, R., McNamara, J., Phillips, B. & Vu, Q.N. (2005). Spatial microsimulation using synthetic small-area estimates of income, tax and social security benefits. Australasian Journal of Regional Studies, Vol 11, No. 3.,
McNamara, J., Gong, C., Miranti, R., Vidyattama, Y., Tanton, R, Harding, A. and Kendig, H. (2009). ‘Two Worlds of Ageing: Spatial Microsimulation Estimates of Small Area Advantage and Disadvantage Among Older Australians’. Paper presented at the 2nd General Conference of the International Microsimulation Association, Ottawa, Canada, June 8 – 10, 2009.
Miranti, R., McNamara, J., Tanton, R. and Harding, A. (2008) “Poverty at the Local Level: National and Small Area Poverty Estimates by Family Type for Australian in 2006’. Paper presented at Small Area Estimation Workshop, University of Canberra, September 2008
Tanton, R., Vidyattama, Y, McNamara, J., Vu, Q.N. and Harding, A. (2008) ‘Old, Single and Poor: Using Microsimulation and Microdata to Analyse Poverty and the Impact of Policy Change Among Older Australians’. Paper presented at UNU-WIDER Conference on Frontiers of Poverty Analysis, Helsinki, September 2008.