Economic Impact Assessment

Transcription

1 October 2005 Parsons Brinckerhoff Australia Pty Limited ACN and Parsons Brinckerhoff International (Australia) Pty Limited ACN trading as Parsons Brinckerhoff ABN Suite 1, 3rd Floor 55 Bolton Street Newcastle NSW 2300 PO Box 1162 Newcastle NSW 2300 Australia Telephone Facsimile newcastle@pb.com.au ABN NCSI Certified Quality System ISO 9001

2 Economic Impact Assessment The Newcastle Airport October 2005 Parsons Brinckerhoff Australia Pty Limited ACN and Parsons Brinckerhoff International (Australia) Pty Limited ACN trading as Parsons Brinckerhoff ABN PPK House 9 Blaxland Road Rhodes NSW 2138 Locked Bag 248 Rhodes NSW 2138 Australia Telephone Facsimile sydney@pb.com.au A PR_0916 Rev D.doc ABN NCSI Certified Quality System ISO 9001

3 Parsons Brinckerhoff Australia Pty Limited and Parsons Brinckerhoff International (Australia) Pty Limited trading as Parsons Brinckerhoff ( PB ). [2004] Copyright in the drawings, information and data recorded in this document ( the information ) is the property PB. This document and the information are solely for the use of the authorised recipient and this document may not be used, copied or reproduced in whole or part for any purpose other than that for which it was supplied by PB. PB makes no representation, undertakes no duty and accepts no responsibility to any third party who may use or rely upon this document or the information. Author: Kari Armitage Signed: Reviewer: Professor Scott Holmes Signed: Approved by: Professor Scott Holmes Signed: Date: October 2005 Distribution:

4 Contents 1. Executive Summary 1 2. Introduction and Background Project Description The History of Newcastle Airport 3 3. Findings of Previous Economic Opportunities Study for NAL 5 4. Current Economic Activities Carparking Retail Property Management Tourism 6 5. Economic Impact Analysis Method Adopted The Value of Operations at Employees Other Expenditure Economic Value of Associated Activity Constraints Employment Pay Packet Effect Economic Value of Passenger Throughput Passenger Spending Associated Economic Impact Construction Phase Economic Impacts Employment Impacts Conclusion References 19 PARSONS BRINCKERHOFF A PR_0916 RevD.doc Page i

5 List of Tables Table 1:1 Summary of Economic Analysis 2005: Economic Benefits 2 Table 5:1: Direct Wages Expenditure 10 Table 5:2: Other Expenditure 10 Table 5:3: Full Time Equivalent Employees 11 Table 5:4: Expenditure per visit 13 Table 5:5: Passenger by type of travel 14 Table 5:6: Estimated Expenditure by Passenger by type of travel 14 Table 5:7: Economic Impact of NAL Upgrade Works: Construction Effects Only 15 Table 6:1: Summary Economic Analysis List of Figures Figure 5-1: Passenger Growth 13 Figure 5-2: Economic Effects of NAL Upgrade 16 Figure 5-3: Employment Effects of NAL Upgrade 17 Attachment Figure 1 Locality Plan PARSONS BRINCKERHOFF A PR_0916 RevD.doc Page ii

6 1. Executive Summary Parsons Brinkerhoff (PB) was engaged by Newcastle Airport (NAL) to undertake an Economic Impact Assessment (EIA) of the (NAL) which is located in the Hunter Region. In particular, the objective was to quantify and assess the economic impact on local business activity, the value of passenger throughput, and the various business activities currently undertaken at NAL. The economic benefits of the activities were considered to be much greater than the output of the development itself. In addition, these benefits commonly flow-on to other sections of the economy. PB therefore adopted an Input-Output model for the purpose of this economic analysis. Using input-output tables from the National Accounts, multipliers were used to calculate the flow-on effects of a change in output in an industry on one or more of imports, income, employment or output in individual industries or in total. The key findings can be summarised as follows: Annual Economic Value Specific Operation of NAL NAL contributes $4.7 million to national output of which $2.9 million directly flows to the local region. The local employment benefit is approximately 21 FTE jobs. Value of NAL activity, in terms of local spend, is approximately $1 million. Annual Economic Value of Passenger Throughput Passengers who were visitors to the region contributed approximately $318 million in gross expenditure, of which $124 million has direct regional value. It is estimated that this visitor spending is associated with 1,580 FTE local jobs. Annual Economic Value of Associated Businesses The economic activity associated with businesses which are located on or immediately around the Newcastle Airport generates approximately $167 million in national income, with an estimated $77 million per annum related to regional income. The local employment associated with these activities is estimated to be 383 FTE jobs. Construction Phase The total direct and indirect economic impact of the project is estimated at approximately $48 million. It is expected that 40 percent, or $19.2 million, of benefits will flow directly to the Hunter Region. The initial $17 million of construction expenditure is expected to generate around 102 local jobs. PARSONS BRINCKERHOFF A PR_0916 RevD.doc Page 1

7 Table 1:1 Summary of Economic Analysis 2005: Economic Benefits Activity National Regional Employment Employment Output Value National Local NAL Operation $4.7m $2.9m Associated $167m $76.6m Business Activity Passenger Value $318m $124m 2,170 1,580 Construction $48m $19.2m Total $537.7m $222.7m 3,336 2,158 In summary, the mix of activities undertaken and supported by NAL are expected to generate approximately $537.7 million in national income and support 3,336 jobs at the national level. The local Hunter Region and local community is expected to benefit significantly from these economic activities with approximately $222.7 million in income and 2,158 jobs supported at the local community level. PARSONS BRINCKERHOFF A PR_0916 RevD.doc Page 2

8 2. Introduction and Background Parsons Brinckerhoff (PB) has been engaged by (NAL) to undertake an Economic Impact Assessment (EIA) of the Newcastle Airport on the Hunter Region. The EIA relates to the direct operations and activities of the airport and the broader impacts associated with the direct and indirect effect of the airports activities and location. The objectives of this study are as follows: Economic Impact Analysis of the Construction Phase consideration will be given to the current new works; proposed future works; and future construction by businesses associated with the airport. Economic Impact of Passenger and Business use of the Airport this considers the flow-on effect created by passengers and businesses using the Airport. The analysis will consider the employment and economic effects, both direct and indirect. The impact of current growth trends will also be considered. Economic Impact Analysis of the Commercial Activities review of the employment and economic value of the range of commercial activities currently undertaken both by Newcastle Airport and businesses located at the airport. Present a Statement of Overall Economic Impact the total economic value and impact of the airport will be detailed based on existing activities and current growth trends. 2.1 Project Description Newcastle Airport is located on Commonwealth land leased from the Department of Defence. NAL is jointly owned by Port Stephens and Newcastle Councils and is located within the Port Stephens Local Government Area (LGA). The airport is located immediately to the south of the Williamtown RAAF base on 28ha of land leased from Defence Estates for civilian operations. The airport is located at the end of Williamtown Drive which runs off Nelson Bay Road, north of Cabbage Tree Road at Williamtown, approximately 26km from Newcastle. A locality map is shown in Figure 1. The land upon which the airport is located is currently zoned 5a Special Uses under the Port Stephens LEP The History of Newcastle Airport The Commonwealth Government was the original owner and operator of Newcastle Civilian Airport until In 1990 Newcastle City Council and Port Stephens Council agreed to take full responsibility for operation, maintenance and development. In 1993 was formed and a 30 year lease was signed with the Commonwealth Government. Upgrades of the terminal area and associated building PARSONS BRINCKERHOFF A PR_0916 RevD.doc Page 3

9 works were undertaken in 1994; new terminal facilities were opened in March 1995; and in 1998 the Department of State and Recreational Development funded a strategic plan for NAL and additional upgrades were completed in Qantaslink operates more than 100 services per week between Newcastle and Brisbane, Melbourne and Sydney. Brindabella airlines launched direct flights between Newcastle and Canberra in April November 2003 saw Virgin Blue airlines begin daily flights to Melbourne and by May 2004, daily services were extended to Brisbane. In May 2004, Jetstar commenced services between Newcastle and Melbourne and Newcastle and Brisbane and more recently to the Gold Coast. Today five airlines, provide a total of 216 flights per week: Virgin Blue; Jetstar; Qantaslink; Aeropelican, and Brindabella Airlines. Since Virgin Blue and Jetstar began operations, the number of passengers has more than doubled from 214,000 in 2003 to around 450,000 in 2004; in 2005 total passenger throughput is expected to exceed 750,000 passengers. It is expected that the airport and surrounding precinct will continue to experience significant growth. In early 2005, $17m of construction works began to facilitate a doubling of capacity of arrivals and departures along with associated on-airport works. The 18 month program will include: $8.25 million to redevelop and enlarge the terminal building; approximately $3 million for an improved roadway system and upgraded carparking ; $300,000 to upgrade power supplies to the airport precinct, and a further $900,000 for associated works to aircraft parking areas, drainage and temporary carparking. PARSONS BRINCKERHOFF A PR_0916 RevD.doc Page 4

10 3. Findings of Previous Economic Opportunities Study for NAL An Economic Opportunities Study of NAL was undertaken by Kellogg Brown & Root Pty Ltd in February The study identified the following with respect to NAL: Joint use and provision of facilities with the RAAF such as apprenticeship training schemes, accommodation, improved public transport, aerospace manufacturing and servicing activities. Opportunity for diversification of revenues by provision of non-aircraft activities located adjacent or near to civil and military airports; Opportunities for an Airport Business and Technology Estate which can provide a differentiator with respect to land and building packages in the region and can provide accommodation, training and conference facilities and support both local and regional business and look to integrate them with import and export activities. The need to establish a marketing strategy that will attract national and international businesses (in both aviation and non-aviation business activities) to provide improved services, a bigger market and employment generation; Economic determinants of growth and demand; understanding the role of the Newcastle Airport within the Sydney Basin and its role servicing aviation and providing economic growth in the Hunter Region; Constraints, including those related to the defence activities as well as environmental concerns, public transport infrastructure limitations, etc; Potential influencers for economic opportunities at NAL that were identified in the study are listed below: airport related business noise, accommodation, service; freight air, intermodal; transport Infrastructure air, road, rail, port; civil air market support airport to lower north coast, Sydney Region, International; access to the Hunter tourism; RAAF Airside operational protocols; aerospace industries servicing, maintenance, research and development; possible common user oil and fuel pipelines; defence manufacturing and service industry support; aircraft maintenance and training, apprentices; improved public transport to the base for RAAF personnel; and maintaining and extending required environmental controls. The potential of the airport is represented by the significant growth in passenger and associated activities over the past two years. PARSONS BRINCKERHOFF A PR_0916 RevD.doc Page 5

11 4. Current Economic Activities 4.1 Carparking NAL currently offers five car parking facilities, with short term, long term and covered options. In 2003/04, it is estimated that approximately 48,200 vehicles used the carparks. By mid 2005, demand for car parking is expected to exceed 97,800 spaces annually. Carpark upgrades are currently underway and on completion will increase the available car parking spaces to Retail Eurest currently operates café facilities on behalf of NAL and employs 22 staff. They offer food and beverages for travellers and visitors as well as providing in flight catering for Qantaslink. That the number of retail outlets will be increased to five as part of the terminal redevelopment in by December Announcements have been made for Insomnia Coffee Bars and Runaway News to be operational upon completion of the works. This is anticipated to support 50 jobs. The retail spend has been calculated at $6.40/passenger (information supplied by NAL) based on 460,000 passengers at 50% of passengers spending then the retail turnover for 2004 was approximately $1.6m, in 2005 the estimated spend is $2.4m. 4.3 Property Management NAL manages property that it leases from the Commonwealth Government. NAL is concerned with the optimisation of the operational assets; terminal, apron, carparks, leases and licences connected with tenants and airline customers. Currently assets are worth and estimated $11m. Tenancies and licenses are in place with 16 organisations including BAE systems, Jetstar Engineering, Newcastle Helicopters, Ball Engineering, car rental companies and ground handling companies for the different airlines. 4.4 Tourism NAL has established links with many tourism organisations. Tourism New South Wales Hunter Regional Tourism Organisation Newcastle Tourism PARSONS BRINCKERHOFF A PR_0916 RevD.doc Page 6

12 Port Stephens Tourism Central Coast Tourism Barrington Tops OnLine Hunter Valley Wine Country Tourism. The airport is a key means of supporting tourism in The Hunter and is therefore an integral part of the tourism infrastructure for the region. PARSONS BRINCKERHOFF A PR_0916 RevD.doc Page 7

13 5. Economic Impact Analysis 5.1 Method Adopted The economic benefits of a particular form of activity are much greater than the output of that activity itself. There will be supplementary benefits for other sections of the economy. These flow-on effects are often much larger than the economic output of the single set of activities reviewed for the project under consideration. These flow-on impacts can be broadly classified as follows: Output the added level of production derived from increased activity within the industry in response to the initial stimulus and the added demand derived from increased consumption in the household sector as a result of wages and salaries derived from this increased activity. Employment the overall increase in jobs that will flow from the initial stimulus. The effect is usually expressed as persons per one million dollars expended. The best way to capture this dynamic element of the economic process is through the National Accounts. These publications are the nation s economic balance sheet and are used to derive gross domestic product (GDP) and its components: the national income account, the national capital account, the national financial account and the national balance sheet. Income, capital and financial accounts and a balance sheet are provided for each sector of the economy. Within the National Accounts there is a specific type of derived statistical tool called the Input-Output Tables. Input-Output tables present a comprehensive picture of the supply and use of goods and services (referred to collectively as 'products') in the economy and the incomes generated from production. These identify the linkages and interaction between different parts of the economy. The possible size of these impacts can be illustrated using multipliers based on interindustry flows in input-output tables. These multipliers indicate the proportion of inputs required to derive final output. These provide a way of answering some of the questions often asked by input-output practitioners. These queries tend to arise because of the types of "what if" analysis for which input-output tables can be used (for example, what would be the impact on employment of an x% change in output by the manufacturing industry). This type of analysis is dependent on knowledge of input-output multipliers and their shortcomings. Using input-output tables, multipliers can be calculated to provide a simple means of working out the flow-on effects of a change in output in an industry on one or more of imports, income, employment or output in individual industries or in total. The multipliers can show just the 'first-round' effects, or the aggregated effects once all secondary effects have flowed through the system. This paper includes analysis of the secondary effects. The multiplier itself has certain key components. the initial effect - an initial $1m of extra output of the industry, and related employment in the industry to produce that output; PARSONS BRINCKERHOFF A PR_0916 RevD.doc Page 8

14 a production induced effect - the combination of: < the first round effect - the amount of output and employment required from all industries that supply goods and services to the industry in order for that industry to produce the initial $1m of extra output; < an industrial support effect - the induced extra output and employment from all industries to support the production of the first round effect; a consumption induced effect - the subsequent inducement for extra output and employment due to increased spending by the wage and salary earners across all industries arising from the compensation received for their labour as part of the other effects above. Some qualifications need to be made: These multipliers are based on the national statistics. Regional multipliers are not available in any useful form, therefore, assumptions have to be made in applying these to the local Hunter Region. There is an implied reliance on the stability of the national accounts and related I-O tables. This assumption holds that the industrial structure of the Australian economy has remained unchanged since 1996/1997 when the I-O tables were originally developed. This assumption directly affects the perceived accuracy of the resultant I-O multipliers. There is a general tendency of I-O frameworks to ignore the presence of supply side constraints. The implications of this assumption are that the economic impact tends to be overstated in situations where there is either excess production capacity, or limitations on availability of inputs (for example skilled labour). An assumption needs to be made about imports: to what extent will inputs be sourced overseas. This analysis assumes no imports will be sourced from overseas (called the Direct Allocation of Imports Method). Overall, the approach adopted represents a simple, direct and valid means of estimating the impact of the NAL operations and activities. 5.2 The Value of Operations at Newcastle Airport Limited This section assesses the economic activity generated by the operational aspects of the airport itself. This does not consider the local businesses that operate within the NAL premises such as cafes and newsagencies etc. The key impacts to consider are; the direct employment of NAL staff; the flow-on benefit associated with the local spend by those employees, and the other expenditure related to the operational aspects of airport Employees As at 30 th June 2005, the NAL employed: total representation of NAL wages (not itemised) PARSONS BRINCKERHOFF A PR_0916 RevD.doc Page 9

15 This represents total wages value of $1.55m. Adopting the simple multiplier of for the transport and storage sector results in a multiplied value of $2.9m. It is estimated that 40% of direct wages expenditure will flow back into local consumption of goods and services. While there is no definitive estimate of the proportion of wages which represent local expenditure, the 40% rate does represent a significant discount which factors in the average rates of tax and related transfer payments, capital repayments and savings. This expenditure will have a multiplied effect within the community. Again there is no definitive estimate; however, the overall multiplied effect is expected to be equal to the initial local expenditure. In summary: Table 5:1: Direct Wages Expenditure Direct Multiplied National Hunter National Hunter 2005 $1.55m $620,000 $2.9m $1.24m Other Expenditure In addition to the employment impacts, NAL also directly expends funds in the local community which has an economic value and flow-on effect. Taking the 2004 audited financial statements as the base and aggregating operational expenses (excluding borrowing costs; depreciation and rental expense) then total direct operating costs totalled $1,149,000. Of this amount 48% relates to the costs associated with security for the airport and the majority of this expenditure (85%) is assumed to relate to local employment. The balance of total spending relates to marketing and consultancy and the inverse is assumed here, in that most of this expenditure (80%) will be with companies outside the region. This results in an estimated local operating spend of $586,000 per annum. This expenditure relates to 460,000 passengers or $1.27 per passenger. On this basis the estimated local spend for 2005 is (750,000 x $1.27) $952,500 and for 2006 (840,000 x $1.27) $1,066,800. However, it is expected that the cost relationship will not be perfectly linear and therefore would level out in On this basis there would be only a small incremental change in employment. If the simple multiplier for property and business services is adopted (1.861) then the multiplied effect of the local spend is: Table 5:2: Other Expenditure National Full Time Equivalent Employment Hunter Full Time Equivalent Employment 2004 $1.1m 10.5 $586, $1.8m 18.0 $952, $2.0m 19.0 $1.1m Economic Value of Associated Activity Constraints A list of associated businesses was provided by NAL. Every business on the list was contacted and information about current levels of employment and anticipated PARSONS BRINCKERHOFF A PR_0916 RevD.doc Page 10

16 employment for 2006 were requested. The majority of businesses supplied this information however a small number did not want to disclose this information. This has required some estimates based on relative employment levels in like businesses and linked to the relative level of activity (predominately the number of flights operated at Newcastle). No information was collected on expenditures by these businesses as it was assumed that a significant number would decline to provide such private information. So the estimates are largely restricted to pay packet effects and therefore are considered to provide a conservative estimate of the impact of these businesses operating in association with the activities and assets supported by NAL Employment The income of all employees is assumed to be equal to the average individual weekly income for the Newcastle LGA. Based on the most recent ABS survey data this was $43,895 per annum (adjusted for inflation since 2001 Census data). The current number of full time equivalent employees for each associated business activity at the airport is presented in the table below. It should be noted that for the purposes of this study, casual or part time employees are considered to be 0.5 of a full time employee. Table 5:3: Full Time Equivalent Employees No. Full Time employees No. Part time or casual employees Equivalent No. of Full time Employees Estimated No. of Full time Employees Organisation QantasLink Jetstar Virgin Blue Brindabella Airlines Aeropelican Ball Aerospace Newcastle Helicopters Newcastle Ground Handling BAE Systems Avis Budget Europcar Hertz Thrifty Airport Retail Total Note: QantasLink and Virgin Blue would not disclose the aggregated employment information required, so an estimate was made based on the number of flights undertaken and using information from other airlines as a base. PARSONS BRINCKERHOFF A PR_0916 RevD.doc Page 11

17 5.3.3 Pay Packet Effect Based on the above data, it can be calculated that the estimated gross employment income generated from employment in airport associated business activities at Newcastle Airport is $19.8m in 2005 moving to $26.6m in The pay packet effect refers to how much income flows into an area because of local employment. In the current case of the jobs, 383 (85%) are assumed to be related to regional employment. Consistent with prior calculations, it is estimated that 40% of these funds tend to be directly expended in the local region (the other 60% normally represent capital repayments, taxes and savings). In the current case this represents an estimated direct annual local spend of $7m in 2005 and $9m in 2006 (assuming the simple total multiplied effect across the board of 2 then the multiplied value is $14m and $18m respectively). While the actual turnover and expenditure data for these businesses are not available, an estimate can be made using information from the National Accounts and the employment number presented above. Taking the transport and storage sector as a proxy 1, for every $1m of turnover there are 5 employees. So for employees the estimated turnover is $90m. Applying the simple multiplier for this sector results in a total estimated multiplied output of $167m. This represents approximately 837 jobs. 1 The simple multiplier for the Transport and Storage Sector was PARSONS BRINCKERHOFF A PR_0916 RevD.doc Page 12

18 5.4 Economic Value of Passenger Throughput Passenger Spending In 2004 Newcastle airport supported 460,364 passengers utilising the services of five airlines. By the end of 2006, it is expected that 840,000 passengers per year will use the airport. The figure below shows the passenger growth from 2003 projected out to Trend Analysis - Passenger type vs Expenditure 25 Expendture per year ($m) Business Visiting Friends and Relatives Tourist Passenger by travel type Figure 5-1: Passenger Growth The reason for passenger travel is important in estimating the amount of expenditure expected from the different types of passengers. The Hunter Region Strategic Tourism Plan reports that domestic overnight visitors average expenditure per visit varies by purpose of visit. Table 5:4: Expenditure per visit Purpose Expenditure per visit Business $396 Visiting Friends and Relatives $202 Tourist $378 Other $212 Note: This report uses estimates from customer surveys undertaken by NAL and divides the passengers into three categories; business, tourism and visiting friends and relatives. The average number of passengers for each category has been taken from the NAL survey data for 2005 and extrapolated to give an average number of passengers by type per year. PARSONS BRINCKERHOFF A PR_0916 RevD.doc Page 13

19 The following table summarises the expected expenditure per annum for each travel purpose. Table 5:5: Passenger by type of travel 2 Purpose Business 34,960 57,000 63,840 Visiting Friends and Relatives 161, , ,000 Tourist/Leisure 128, , ,200 Resident Departing/Returning 135, , ,960 Total 460, , ,000 Table 5:6: Estimated Expenditure by Passenger by type of travel Purpose Business $13,844,160 $22,572,000 $25,280,640 Visiting Friends and Relatives $32,522,000 $53,025,000 $59,388,000 Tourist/Leisure $48,686,400 $79,380,000 $88,905,600 Total $95,052,560 $154,977,000 $173,574,240 x Simple Multiplier (x 2.051) $194,952,801 $317,857,827 $356,000,766 A simple multiplier of was adopted from the National Accounts tables for Accommodation, Cafes and Restaurants to result in a multiplied impact of approximately $318m for Retail Spend at the Airport The retail spend at the airport is estimated to be $1.6m for 2004, by extrapolation, estimated expenditure on retail for 2005 will be approximately $2.4m and in 2006 approximately $2.7m. This figure would be included in the expenditure estimates presented above Associated Economic Impact An estimation of the aggregate economic effects of the passenger throughput supported by the Newcastle Airport can be undertaken. The gross expenditure by visitors for 2005 was estimated to be $155m. Assuming that 40% of the direct spend flows into the local economy and the simple across the board multiplier of two is adopted then the local economic value is $124m per annum. If the initial employment effects for accommodation, cafes and restaurants is adopted as a simple proxy, then total employment supported by this level of expenditure is 1,395 FTE jobs (using the initial effect estimate of 9 FTE jobs per $1 million expenditure), the multiplied national employment effect is 2,170 FTE jobs (using the simple multiplier of 14 FTE jobs per $1 million expenditure). Local jobs are estimated to equate to 85% of direct jobs (1,186 FTE) plus 40% of the difference with the multiplied effect ((2,170 1,186) x.40% = 394 FTE). Therefore, total estimated local FTE jobs is 1,580. Caution should be taken in interpreting such estimates, as outlined previously the information is based on the National Accounts as there is no current regional accounts. 2 This distribution is based on passenger data collected by NAL in the first half of PARSONS BRINCKERHOFF A PR_0916 RevD.doc Page 14

20 5.5 Construction Phase Economic Impacts The upgrade works currently underway total an estimated $17m. Using this base line estimate, assessments are made with respect to the impact on the economy. The table below summarises the multipliers for output and employment in the construction industry. The most recent input-output table available is for They show that, for every $1m spent on construction output (houses, non-residential buildings, etc.) in , a possible $2.8m in output would be generated in the economy as a whole. Table 5:7: Economic Impact of NAL Upgrade Works: Construction Effects Only Initial effects (1) First round effects (2) Industrial support effects (3) Production induced effects (4)=(2+3) Consumption induced effects (5) Total multiplier (6=1+4+5) Output ($m) Employment (no.) (a) Direct Allocation of Imports Method Source: Australian National Accounts: Input-Output Tables , (5209.0). The most recent input-output employment table available is for This shows that every $1m of additional output gives rise to 6 full-time jobs in the construction industry (the initial employment effect), and 17 full-time jobs in the economy as a whole from all effects. In many cases the employment impact will be higher in terms of actual personnel as many will be employed on a part-time or casual basis (i.e. 17 full time jobs equates to say 34 part time jobs). These flow-on effects are made up as follows. The initial effect of the additional construction is $1m. The first round effect for this additional construction would be the increased value of activity of around $0.5m in those businesses manufacturing the materials needed for the additional construction, such as concrete and steel frames. The businesses supplying and servicing the concrete and steel frame businesses, such as aggregate quarrying and raw steel production, experience an increased demand for their products and services. This industrial support effect is estimated to be an additional $0.4m. As activity has increased in the construction industry, as well as in the suppliers to that industry and the suppliers to the suppliers, there is an increase in wages and salaries to employees in this chain. The spending of these wages and salaries induces a further round of consumption effects in other areas of the economy totalling an additional $1m. Care is needed in interpreting multiplier effects; their theoretical basis produces estimates which somewhat overstate the actual impacts in terms of output and PARSONS BRINCKERHOFF A PR_0916 RevD.doc Page 15

21 employment. Nevertheless, the estimates illustrate the high flow-on effects of construction activity to the rest of the economy. Clearly, through its multipliers, construction activity has a high impact on the economy. The total estimated construction cost of upgrade works is $17m. Based on multipliers from the national accounts the flow-on effects are as follows: a production induced effect - the combination of: < the first round effect of x $17m = $7.75m This is the amount of output required from all industries that supply goods and services to the construction industry needed in order to undertake the upgrade works. < an industrial support effect of x $17m = $7.23m This is the induced extra output from all industries to support the production of the first round effect; a consumption induced effect of x $17m = $15.6m This is the subsequent inducement for extra output due to increased spending by the wage and salary earners across all industries arising from the first round effect: The total national economic impact of the project is approximately $48m ($47.58m). It seems reasonable to presume that 40% of these benefits would flow to the Hunter Region. This is an estimate of the localised content of the direct and first round effects. It is likely to be conservative. From this estimate the boost to the local economy from the project would be at least $19.2m. The chart below indicates the economic impact of the construction. Economic Effects of NAL Upgrade Construction Only $m: total $48m Initial Effects Consumption Induced Effects Production Induced Effects Industrial Support Effects First Round Effects Figure 5-2: Economic Effects of NAL Upgrade PARSONS BRINCKERHOFF A PR_0916 RevD.doc Page 16

22 5.5.2 Employment Impacts The chart below indicates the employment impact of the construction. The same basic procedure applies, but in this case each $1 of construction expenditure generates a number of new full time positions, both directly and in flow on-effects in other sectors. The initial effect of the additional construction is the amount of additional employment in the construction sector (6 persons per $1m or 102 people). The jobs are assumed to be locally based. The first round effect relates to extra labour required for this additional construction from suppliers of the materials needed for the additional construction, such as concrete and steel frames. This amounts to three full time positions per $1m or 51 positions. The businesses supplying and servicing the concrete and steel frame businesses, such as aggregate quarrying and raw steel production, experience an increased demand for their products and services. This industrial support effect is estimated to create an additional two full time positions per $1m or 34 positions. There is an increase in wages and salaries to employees in this chain valued by these induced production effects. The spending of these wages and salaries induces a further round of consumption effects in other areas of the economy totalling an additional 6 full time positions per $1m spent representing 102 positions for the first round. The final result is 289 full time positions. Employment Effects of NAL Upgrade Construction: no. full time jobs: total 289 Initial Effects Consumption Induced Effects Production Induced Effects Industrial Support Effects First Round Effects Figure 5-3: Employment Effects of NAL Upgrade The economic and employment impacts estimated above relate to the economy as a whole and are therefore not isolated to the local Newcastle economy. There is no extant empirical data on the ratio of local to no-local effects or expenditures. However, it is expected that a significant proportion of the construction expenditures will be with local Hunter businesses and individuals. The available data indicates that $17m of construction expenditure will result in 102 direct jobs. Assuming that 85 percent of these jobs relate to the local community then this represents approximately 87 direct local jobs. In addition, it is estimated that an additional 81 indirect jobs will be in the Hunter Region ((289 87) x.40%). PARSONS BRINCKERHOFF A PR_0916 RevD.doc Page 17

23 6. Conclusion In this report we have applied Input Output methodology to assess the economic impact of proposed economic developments at NAL. Our findings suggest the proposed developments are expected to yield significant economic outcomes at both the national and regional level. The economic impact of the proposed developments will provide significant support to both local business and construction activity. Our findings suggest: Regional employment is expected to benefit significantly with approximately 2,158 full time jobs supported. The multiplied impact on passenger expenditure is anticipated to reach approximately $318 million in 2005 and $356 million in The local Hunter community is expected to benefit from a $19.2 million increase in Regional income directly associated with the construction phase of the project. The initial $17 million of construction expenditure is expected to generate approximately 87 FTE jobs at the local community level. Our findings suggest NAL supports approximately $537.7 million in income and 3,336 full time jobs at the National level. This increase in activity is significant and is expected to result in a substantial multiplied effect on local economic activity. At the local level, the Hunter community is expected to benefit from approximately $222.7 million in income and 2,158 jobs. Table 6:1: Summary Economic Analysis 2005 Activity NAL Operation National Output Regional Value Employment National Employment Local $4.7 million $2.9 million Associated $167 million $76.6 million Business Activity Passenger Value $318 million $124 million 2,170 1,580 Construction $48 million $19.2 million Total $537.7 million $222.7 million 3,336 2,158 PARSONS BRINCKERHOFF A PR_0916 RevD.doc Page 18

24 7. References Australian Bureau of Statistics (2001). Census Basic Community Profile and Snapshot. Newcastle (c) Remainder (Statistical Local Area). Canberra: Australian Government Publishing Service. Australian Bureau of Statistics (1995). Information Paper: Australian National Accounts: Calais Consulting and Globe Consulting (2004). The Hunter Region Tourism Plan. FordComm Consulting (2005). Community Research A Study of Attitudes in the Lower Hunter and Central Coast towards Newcastle Airport. Hunter Valley Research Foundation (2004) Hunter Region Economic Indicators, December Quarter Hunter Valley Research Foundation (1992) A Discussion of Input-Output Modelling and the Regional Model Developed by the Hunter Valley Research Foundation, Working Paper 1/92. Jensen, R. & West, G. (1986) Input-Output for Practitioners: Theory and Applications, Australian Regional Developments No.1, AGPS, Canberra. Kellog Brown & Root Pty Ltd (2003). Newcastle Airport Economic Opportunities Study. Port Stephens Council. Keystone Corporate Positioning (2005). Key Findings of Stakeholder Interviews, Recommendations and Next Steps. Newcastle Airport (2005). Manager s Report, Attachment A Passenger Surveys. Newcastle Airport (2005). Newcastle Airport Business Plan. Newcastle Airport Review of Operations. Newcastle Airport website. Tourism Research Australia (2003). Hunter Region Tourism Profile Tear Ending June Tourism New South Wales. Twohill, B. & Sheehan, W. [Eds] (1981) Input-Output Analysis and Regional Multipliers, Proceedings of a Colloquium held at the University of Newcastle, Institute of Industrial Economics, The University of Newcastle. PARSONS BRINCKERHOFF A PR_0916 RevD.doc Page 19

25 Figures

26