The Intergenerational Reports, released by the Australian Federal Treasury, have outlined future fiscal difficulties that are likely to be faced by Australia over the next forty years. These include higher health care, aged care and age pension costs, along with lower labour force participation rates as a large percentage of the population move to retirement age.

This dynamic microsimulation model simulates the life cycle of around 200,000 individuals; based on a 1 per cent sample of the 2001 census. Individuals are added through births and migration, and removed through death and emigration, become disabled, form households, study, work, earn money, buy assets, pay tax and use aged care and health services. All these details are estimated to up to 50 years, and users can observe how the Australian population grows and develops over time under a number of different scenarios.

The aim of APPSIM is to allow the long-term, distributional impacts of policy changes to be simulated, particularly their social and fiscal impacts as the population ages. With APPSIM, the impacts of a policy can be simulated under a range of different assumptions; for example high or low birth rates or migration rates, strong or weak wage growth, high or low unemployment. Furthermore, the breadth of the model allows a very wide range of policy types and impacts to be simulated. Finally, modelling individuals allows the impacts of policy to be analysed at a highly detailed level.

APPSIM has been used to simulate the distributional impacts of increasing the superannuation contribution rate, the age pension entitlement age and changes to levels of educational attainment.

For more information about this model contact Simon Kelly.