Market Economics - Memo

Latest news & views from market economics / November 2012

New website
M.E recently released its new look website. Check it out at www.me.co.nz

market m.eter
M.E has been developing an online software product called market m.eter™ for retail and commercial operators. Watch this space – more details coming soon.

Transport research
M.E is pleased to have been selected as a member of the Ministry of Transport’s Policy Consultancy Pool.

Cruise ship industry
We have recently completed another biennial update of the economic impact of the New Zealand cruise ship industry. Key findings discussed in next m.emo.


 

Introducing m.emo

Welcome to M.E’s newsletter! We are excited to bring you this first communique. With each edition we look forward to telling you a bit more about who we are and what we do. We will feature articles that provide insights into our latest market consultancy projects, illustrate relevant policy analyses, introduce our spatially explicit products and innovative research ventures. As a sign of the times, this m.emo has a distinct local government focus, with the rebuild of Christchurch and changes in New Zealand’s approach to spatial planning key areas of interest at present. We hope this m.emo will be informative and thought-provoking, and of course we welcome your feedback and ideas.

Sustainable Pathways II

Sustainable PathwaysUrban areas the world over face many challenges as the number of inhabitants who choose to live in cities increases and the demand for quality urban living spaces grows. Pressures such as providing transport, education, health, employment, and protecting biodiversity and water quality put severe strain on urban systems and their planning frameworks. Our decision-making processes are characterised by increased data and information of our economy and environment and their integrated functioning, recognition of the complexity or urban systems, and an increase in the options for new technological platforms to integrate how we live and govern in urban areas.

The Massey University led Sustainable Pathways MBIE research programme ($3.6 million over 6 years), in which Dr Garry McDonald (M.E Environment) is an Objective Leader, is now approaching the half-way point. A prototype ‘Integrated Scenario Explorer’ (ISE) simulation model has been jointly developed by M.E Environment and the Research Institute of Knowledge Systems for Auckland Council and Greater Wellington. The ISE model is a Spatial Decision Support System which integrates existing demographic, socio-economic, environmental, land use and transport models into a software platform which tracks land use change at a detailed spatial resolution (e.g. 50m x 50m) across a 50 year time horizon. Through integration of these models Council are able (for largely the first time) to account for dynamic interdependencies, feedbacks and time lags that characterise complex urban systems. The ISE model enables users to run simulation interactively, engage with the system, change key levers and directly observe the results in key metrics (economic, environmental and social). Results are presented visually (as shown) and can be saved for further analysis (as spreadsheets) or presentation purposes (animations, maps).

Dr Garry McDonald, 09 915 5520 or garry@me.co.nz

Economics of resilient infrastructure

The M.E Environment team was a successful bidder in the Ministry of Business, Innovation and Employment’s 2012 Science Investment Round. The GNS Science led “Economics of resilient infrastructure” proposal, in which Dr Garry McDonald (M.E Environment) is a Research Aim leader, was awarded $2.8 million over 4 years.

The proposed research will develop a model for estimating the economic impacts of infrastructure failure as a consequence of major hazard events and infrastructure-only outages. The research will enable users to value improvements in infrastructure resilience and to assess the economic implications of infrastructure recovery options. At the heart of this research is the development of a Spatially Explicit Dynamic Economic Model (SEDEM), to assess the full range of economic impacts associated with infrastructure failure following an event. SEDEM will significantly extend current economic modelling capabilities, to identify potential structure changes in the economy, spatial shifts in economic activity, and patterns of economic recovery over time. SEDEM will be used to simulate the economic consequences of infrastructure failures based on real (Christchurch) and hypothetical (Auckland) events and will be readily transferable to other hazards and regions.

Dr Garry McDonald, 09 915 5520 or garry@me.co.nz

Evidence base for earthquake recovery

Following the September 2010 and February 2011 earthquake series, M.E has been assisting key stakeholders1 in greater Christchurch in their post-earthquake analysis and planning. A core aspect of M.E’s work has been development of three major assessment tools – firstly to identify the total and additional workforce needed for the recovery; secondly to understand the likely residential growth patterns in the post-earthquake future; and the thirdly to examine the nature, extent and timing of the shortfall in accommodation for both residents and the workforce as the recovery proceeds.

The nature of the tasks meant that simulation models would be the most effective solution. The modelling posed considerable challenges in each case, especially as the earthquakes meant that the usual foundations of modelling – a solid base point, relative stability in the economic and social processes, and clear understanding of the drivers at work – were all subject to considerable uncertainty. That challenge was further compounded by limitations in the available data, together with the urgency to produce robust planning and monitoring tools as quickly as possible.

Nevertheless, M.E was able to develop three comprehensive models – the Temporary Workforce Model, developed for Christchurch Earthquake Recovery Authority (CERA) and Christchurch Development Corporation (CDC) by Greg Akehurst and Garry McDonald; the Household Growth Model, developed for UDS partners by Douglas Fairgray and Rebecca Foy; and who also developed the Short Term Housing Model, for CERA. The common purpose of the models is to assist the recovery process by providing views of possible futures, in a robust manner and with sufficient detail to be directly applicable to decision-making and policy development.

The Temporary Workforce Model assesses the size and nature of the additional labour force required to rebuild damaged dwellings, commercial properties and infrastructure. It examines the size of the recovery task – in terms of timings, amounts and costs of infrastructure replacement, commercial property rebuild, and dwelling rebuild and repair – and taking into account how the Canterbury region economy and workforce will cope with the scale of activity required, to identify both the size of the external workforce required and its skills-occupational makeup, at each point in time during the rebuild. It draws on the capabilities of the M.E Economic Futures Model to show the direct, indirect and induced employment, and is applied to identify how the rate and timing of rebuild activity, and the capacity of the regional construction sector, will together affect the additional workforce required.

The Household Growth Model provides new post-earthquake resident household growth projections taking into account the changed environment. The projections, by location throughout the Urban Development Strategy area (Christchurch City, and areas of Waimakariri District and Selwyn District) are for four future recovery scenarios (rapid, quick, moderate and slow). An assessment of expected population and household losses due to the earthquake damage is made, and growth is allocated according to earthquake damage and loss of land capacity, future residential capacity, new greenfield areas, provision of infrastructure, land damage and anticipated household location preferences. It distinguishes between ‘Re-locating Households’ (who must move from the Red Zone areas) and ‘New Households’ from in-migration and new formation, and provides a basis for both public sector planning and the private sector’s re-evaluation of future directions.

The Short Term Housing Model tracks housing availability, combining information on supply - private dwellings, commercial accommodation and temporary housing, together with detail on the extent of earthquake damage to dwellings, the reconstruction period – with estimated demand for accommodation (resident households, external workforce) to assess total housing availability and needs. It shows the net demand-supply situation - the implied shortfall - at each point in time (week) during the short and medium term recovery and reconstruction period. It examines how the size of the workforce, construction of temporary dwellings, rebuild of commercial accommodation, and access to the regional construction workforce, will individually and collectively affect the speed of the rebuild, and the availability of accommodation.

The current phase of the work is to combine the three core models into an Integrated Model structure. This is because each model portrays a specific aspect of the overall recovery picture, but has common elements with the others. For example, the substantial external workforce required to help rebuild the city over a short time frame will have significant demands for accommodation. However, limitations in housing availability to accommodate those workers would mean the available workforce would be smaller. This would mean that the rate at which repairs and rebuilds are completed will be slower, affecting demand and competition for housing, as well as any dwelling shortfall and overall livability, influencing in turn population loss, together with the likelihood and opportunity for new population growth.

The Integrated Model links the key elements in a dynamic structure, which establishes the direct relationships and feedback loops, and allows them to operate sequentially through time, and tracks the changes as they occur. Its sequential structure makes it easy to track each component over any time period, and examine all or any component at any point in time, to identify the status of the recovery process. Thus, such indicators as the numbers of dwellings which are damaged but able to be occupied, those already repaired, those with repairs under way, dwellings still not able to be occupied, the numbers of rebuilds under way and completed, the size of the external workforce required for residential vis à vis infrastructure work, the availability of construction labour to build dwellings for households new to Christchurch, the amount of commercial accommodation available, are all important and inter-related. The detailed WYSIWYG layout used (what you see is what you get) is required to show the progression of the different aspects of the recovery, and how the intended (and unintended) outcomes of actions or circumstances flow through the process.  In particular, it means the effects of key assumptions or decisions can be tracked. The speed of recovery and rebuild is a critical issue, and it is important to understand the significance of different decisions – individually and in combination – as well as all of the necessary assumptions. For example, constructing temporary accommodation will divert some of the external workforce away from repairing damaged dwellings, but will also mean that a larger workforce can then be accommodated to undertake a larger volume of repair work. Identifying such trade-offs is important.

The Integrated Model is now being populated with the most recent information available from the rapidly evolving post-earthquake situation.

1. Canterbury Development, Corporation, Christchurch City Council, Waimakariri District Council, Selwyn District Council, Environment Canterbury, and the Canterbury Earthquake Recovery Authority

Dr Douglas Fairgray, 09 915 5514 or doug@me.co.nz

Christchurch rebuild materials requirements

Rebuilding a city requires enormous volumes of building materials, and poses logistical conundrums for the construction industry: what quantity of materials will the Christchurch rebuild use and when will they be needed? M.E is also working with the Christchurch Earthquake Recovery Authority and the private sector to assess possible choke points in the supply chain for these materials. This will inform production capacity planning and ensure that material availability does not hamper the reconstruction of Christchurch’s commercial, civic and residential buildings. This work is ongoing as development plans evolve and the rebuild begins in earnest.

   

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