Dris proposal for national licensing of the plumbing and gasfitting occupations
Sensitivity testing of key assumptions
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- Bu səhifədəki naviqasiya:
- Alternative licence period
- Net present value assumptions
- Net present value operating period
- Labour mobility assumptions
1.14Sensitivity testing of key assumptionsA sensitivity analysis of key assumptions of the cost–benefit analysis was undertaken for this RIS. As the Office of Best Practice Regulation states: There may be considerable uncertainty about predicted impacts and their appropriate monetary valuation. Sensitivity analysis provides information about how changes in different variables would affect the overall costs and benefits of the regulatory proposal. It shows how sensitive predicted net benefits are to different values of uncertain variables and to changes in assumptions. It tests whether the uncertainty over the value of certain variables matters, and identifies critical assumptions.26 Alternative licence periodThe national licensing model assessed in the Consultation RIS included a standard licence period of three years across all licence types and jurisdictions. A proposal has been agreed for a flexible approach which will allow licensees to apply for a one, three or five year term (i.e. five years as a maximum). The following discussion was included in the Consultation RIS to inform the decision process. It has been retained here to demonstrate the variables considered and the impact that they have. The impacts of three alternatives are assessed: a shorter licence period of three years as a maximum a higher licence period of ten years as a maximum a perpetual licence, meaning that there is no defined period to the licence and it never needs to be renewed. Under a standard three (or ten) year licence period, licensees in jurisdictions that currently have a licence period of less than three (or ten) years would benefit because they would not need to renew their licence as often (similar to the benefit received under a five year licence period). Where the licence period is already three (or 10) years, there would be no impact. The highest licence period currently set by states and territories for plumbing and gasfitting licences is five years. Therefore, under a ten year period, licensees in all jurisdictions would benefit from renewing their licence less often. In jurisdictions with a licence period of more than three years, a three year licence period would lead to a cost for licensees, as they would have to renew their licence more frequently. Under a perpetual licence, licensees in all jurisdictions would benefit from no longer needing to periodically renew their licence. New licensees would still need to apply for a licence, but once it was received and eligibility criteria met, no renewals would be necessary. Therefore, the cost of time and fees currently spent on renewing licences would be entirely avoided under this option. Assuming that only the processing component of fees would be impacted by a change to the licence period, Table 4.37 shows the national overall quantified net impact of each option under each licence period assessed. The figures in brackets show the difference between the impact under a maximum five year licence period and the alternative period being assessed. For example, having a perpetual licence period would result in an additional $34.13 million worth of benefits compared to a maximum five year licence period. Table 4.37: Net overall impact of national licensing under various licence periods
Net present value assumptionsDiscount rateA sensitivity analysis was undertaken on the 7 per cent discount rate used to calculate NPV figures in this RIS. Table 4.38 highlights the national overall quantified net impact of each option under alternative discount rates (specifically, the impact of 3 per cent and 10 per cent on the overall result). The figures in brackets show the difference between the impact with a 7 per cent discount rate and the alternative rate being assessed. For example, under the two tier option, using a 10 per cent discount rate would decrease the overall national NPV by $88.01 million compared to using a 7 per cent discount rate. Table 4.38: Alternative discount rates for the options
Net present value operating periodA sensitivity analysis was undertaken on the operating period used to calculate NPV figures in this RIS. Table 4.39 highlights the impact that increasing the operating period (specifically, from ten years to 15 and 20 years) has on the net quantified impact on the options. The figures in brackets show the difference between the impact over a 10-year operating period and the alternative period being assessed. For example, under the two tier option, using a 20-year operating period would result in an additional $323.35 million worth of benefits compared to a 10-year operating period. Table 4.39: National overall net impact of the options under alternative net present value operating periods
Note: A real discount rate of 7 per cent and a licence term of three years have been used. The results in Table 4.39 highlight the impact that different assumptions about the operating period can have on the estimated costs and benefits of the options. In this case, increasing the operating period has a positive effect on the NPV estimate as the majority of costs are short term (that is, transitional), while the majority of benefits are long term. Labour mobility assumptionsThe benefits from labour mobility represent a significant share of the total benefits attributed to national licensing. Given the exact impact of labour mobility is also uncertain (as it is only one possible scenario), it is appropriate to conduct sensitivity analysis of this impact. The assumption with the greatest level of uncertainty in estimating the benefit of labour mobility is that 10 per cent of the benefit estimated by the Productivity Commission would potentially be realised through national licensing. Sensitivity has therefore been conducted on this 10 per cent assumption. After the release of the Consultation RIS, no feedback was provided by stakeholders that indicated an assumption of 10 per cent was inappropriate. However, further feedback received from jurisdictions suggests that some States and Territories believe an estimate of 10 per cent should be considered as an upper bound estimate. As such, the assumptions used in this sensitivity analysis represent lower estimates than the 10 per cent used in the main analysis reported in this Decision RIS. The two alternative assumptions shown in this analysis are that:
The overall impact of national licensing under these assumptions, compared to the 10 per cent assumption, are shown in the table below. Table 4.40: Net overall impact of national licensing under various labour mobility scenarios
NPV = net present value The jurisdictional impacts under the proposed option are also shown in the table below. Table 4.41: Net overall impact of Three tier sub-option 2 (the proposed option) under various labour mobility scenarios
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