National Licensing for Property Occupations Consultation Regulation Impact Statement
Inputs and assumptions underlying the analysis
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- Real discount rate
- Evaluation period
- Wage rate
- On-cost and overheads
- Inflation rate
Inputs and assumptions underlying the analysis
The following tables provide details on all the key data sources and assumptions made in the impact analysis for this Consultation Regulation Impact Statement. In some areas assumptions have been made where data is not readily available. Where these assumptions are made the method for making the assumption is explained in the text and tables below.
All future cost and benefit cash flows will be discounted to 2012 dollars using a real discount rate of 7 per cent in line with the requirements of the Best practice regulation handbook, which also recommends sensitivity testing using 3 per cent and 10 per cent discount rates.46 Table 4.39: Discount rate and sensitivities
Evaluation periodThe Best practice regulation handbook states that ‘the total period [of evaluation] needs to be long enough to capture all potential costs and benefits of the proposal‘ and provides guidance that ‘in view of the difficulty of forecasting costs and benefits over long periods, exercise caution when adopting an evaluation period longer than 20 years’.47 Accordingly, an evaluation period of 10 years has been used, with sensitivity testing using 15 and 20 years. However, for the purposes of the impact analysis, it assumed that national licensing will commence for the first tranche of occupations from 1 July 2013.48 Western Australia has advised that the operating start date in its jurisdictions is uncertain. Western Australia will consider its position following the consultation period. This has not been reflected in the cost–benefit analysis.
Note: Australian Government 2010, Best practice regulation handbook, Canberra, p. 63. Wage rateA jurisdiction-specific wage rate has been used in the model, based on data available from the Australian Bureau of Statistics relating to employee earnings and hours.49 Hourly cash earningsData on hourly cash earnings for real estate sales agents has been sourced from the Australian Bureau of Statistics, Employee earnings and hours (catalogue 6306.0) using the Australian and New Zealand Standard Classification of Occupations (ANZSCO) codes. According to the ANZSCO code 612, real estate sales agents sell, lease and manage non-residential property and private properties, and broker the buying and selling of businesses. ANZSCO suggests that an indicative skills level for this occupation is an Australian Qualifications Framework Associate Degree, Advance Diploma or Diploma or at least three years of relevant experience (ANZSCO skill level 2). Alternatively, the indicative skill level of this occupation is an Australian Qualifications Framework Certificate III, including at least two years of on-the-job training, or a Certificate IV, or at least three years of relevant experience (ANZSCO skill level 3).50 It is acknowledged that these wage rates overestimate the wage rate for an agent’s representatives. The hourly cash earnings rates below are based on ordinary time worked per person (excluding overtime), based on the specific hours worked in each jurisdiction. It is assumed that as the activities involved with national licensing are ancillary to employment, the opportunity cost of time is the wage rate that can be earned in the industry (i.e. hourly cash earnings). On-cost and overheadsAccording to the Australian Bureau of Statistics labour costs survey (2002–03), an on-costs multiplier of 1.129 is appropriate for the ‘property and business services’ industry, which includes: employee earnings superannuation payroll tax worker’s compensation fringe benefits tax.51 In the absence of any other information, the Victorian guide to regulation suggests that an overheads multiplier of 1.5 is appropriate.52 The Victorian Competition and Efficiency Commission suggests that overhead costs include building costs (floor space, fixtures and fittings maintenance and services), equipment, consumables, IT and other support services, administrative support and corporate overheads (senior management, corporate finance, human resources and legal services). Based on this information from the Australian Bureau of Statistics and Victorian Competition and Efficiency Commission, an on-cost and overheads multiplier of 1.693 is applied to the hourly cash earnings of property occupations (that is, 1.129*1.5 = 1.693) Inflation rateIn order to inflate the hourly cash rates to 2012 dollars, the national consumer price index (CPI) for the period March 2010 to December 2011 was used based on data from the Australian Bureau of Statistics (catalogue 6401.0).53 Note that the national CPI figures have been used. While ideally the wage rates would be inflated to 1 July 2012 (as the net present value is calculated as at 1 July 2012), the most recent data available when writing this report was CPI figures from December 2011. Table 4.41: Wage rate assumptions
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