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CGE modelling of the resources boom in Indonesia and Australia using TERM

By Glyn Wittwer and Mark Horridge

Abstract

The sharp increase in Australia's terms of trade since 2003-04 has dramatic regional and sectoral implications. Mining-intensive regions have gained from the jump in export prices. Import-competing sectors have faced greater competition both from falling import prices and due to rising demand for domestic factors from the mining sectors. The drought of 2006 will widen the gap between winning and losing regions. In Indonesia, even if we assume that the oil extraction sector is facing resource depletion, a long-run terms-of-trade improvement may result in aggregate consumption increasing should real GDP fall relative to the base case. The TERM framework is highly suitable for modelling Brazil and China, each with around 30 regions.Resource /Energy Economics and Policy,

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