04/03/2016

Print Article: Call for code of conduct for economic modellers after saga surrounding BIS Shrapnel negative gearing mo

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Callforcodeofconductforeconomicmodellersaftersaga
surroundingBISShrapnelnegativegearingmodelling
GarethHutchens
Published:March4,201612:15AM

TheuseandabuseofeconomicmodellinghasbecomesobadinAustraliathatweneedtoadoptacodeof
conductforeconomicconsultants,similartothosefollowedbyauditorsandactuaries,theAustraliaInstitute
says.
TheAustraliaInstituteiscallingforacodeofconducttobeintroducedinthewakeofthesagasurrounding
modellingproducedbyBISShrapnelonThursday,whichpurportstoshowtheeconomicconsequencesof
restrictingnegativegearingtonewresidentialproperties.
ThemodellingwasbeingchampionedbyTreasurerScottMorrison,whosaiditshowedLabor'sproposalon
negativegearingwasilldesigned.
Itpredictedthatabolishingnegativegearingonestablisheddwellingswouldwipe$19billionfromAustralia's
grossdomesticproductandpushuprentalpricesby10percent.
ButBISShrapnelassociatedirectorKimHawtreywouldnotsaywhocommissionedthemodellingdespite
theobviouspoliticalramificationsofitsconclusionssayingonlytheywerea"privateclient."
Andthereportalsodidnotstateclearlywhatitsassumptionsare,norwhattypeofmodellingprogramsit
used.
ThelackoftransparencyhaspromptedtheAustraliaInstitutetocallforacodeofconducttobeintroduced,
sayingthemisuseofsuchmodellingneedstocometoanend.
"OnThursdaywesawmodellingdrivenintothecentreofthetaxreformdebatebyanunknownvested
interest,"AustraliaInstituteexecutivedirectorBenOquistsaid.
"WhilethestartlingallegationsintheBISShrapnelreporthavebeenquicklytornapartbymanyeconomists,
ithasnonethelessmisinformedandmongeredfearamongthepublic.
"Wecallonthegovernmenttodevelopacodeofconducttoensurethestandardofalleconomicmodelling
usedtoinformGovernmentistransparentandofahighstandard,"hesaid.
"It'snottoomuchtoaskforaconsistentstandard.Thereisabsolutelynoreasonwhyallsidescan'tatleast
agreeontheminimumrules."
TreasurerScottMorrisonseizedonthereport,describingitas"anindictmentonLabor'spolicy".
"Whatitshowsis[that]theyjusthaven'tdonetheirhomeworkonthis,"hesaid.
ButhelatercameunderfireafterBISShrapnelclarifiedthatitsmodellingwaspreparedbeforeLabor'spolicy
wasannounced.
"Theassumptionsweresetseveralmonthsago,andtheanalysisdonelatelastyear,wellbeforeLabor
announceditspolicy,"BISShrapnelassociatedirectorKimHawtreytoldFairfaxMedia.
AustraliaInstituteexecutivedirectorBenOquistsaidstateandfederalgovernments,whoarethemain
audienceforeconomicmodelling,haveauniqueabilitytoinfluencethebehaviourofeconomicmodellersby
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04/03/2016

Print Article: Call for code of conduct for economic modellers after saga surrounding BIS Shrapnel negative gearing mo

requiringthatallmodellingaimedatinfluencinggovernmentdecisionsconformtominimumstandards.
Hesaysthecodeofconductshouldrequiremodellerstodisclosewho,ifanyone,commissionedapieceof
work,toclearlydiscussintheirkeyassumptions,toprovidesensitivityanalysiswhereappropriate,andto
explainthechoiceofeconomicmode.
Hesaysmodellersshouldalsotakeresponsibilityfortheplausibilityoftheirresults,andthefullmodelling
resultsshouldbemadepubliclyavailablewhentheyarereleasedtothemedia.
"Auditorshaveacodeofconductbecausefinancialinformationisopentoabuseandpeoplerelyonthis
informationtomakeimportantdecisions,andactuarieshaveacodeofconductthatincludescontext,basic
rulesandadeclarationoffairnessandaccuracy,"MrOquistsaid.
"Aconsistentstandardwouldbeintheinterestoftheeconomicmodellingindustryanditsreputation."
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Thisstorywasfoundat:http://www.smh.com.au/federalpolitics/politicalnews/callforcodeofconductforeconomic
modellersaftersagasurroundingbisshrapnelnegativegearingmodelling20160303gn9nv9.html

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